Background: Climate Change

International Ratification of Kyoto Protocol and Clean Development Mechanism

Chen Gang, Ph.D. Research Fellow, East Asian Institute, NUS

Global warming becomes one of the most serious environmental problems Most scientists believe climate change is caused by greenhouse gas emission In the Kyoto Protocol, GHGs include: CO2, CH4, N2O, HFCs, PFCs, SF6
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Global GHG emissions increased 70% between 1970 and 2004

IPCC Fourth Assessment Report, Working Group III, 2007

Disastrous Consequences
Frequent drought, flood, tropical storms Rising sea levels Species extinction (20-30% of species if temperature increases exceed 1.52.5C) Insect population increase and epidemic outbreak
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International Climate Negotiations

UNFCCC (1992) Kyoto Protocol (1997) Under KP, industrialized countries should cut GHG emissions an average of 5.2% below 1990 levels by 2008-2012 KP became first international treaty setting legally-binding targets
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UNFCCC (1992)
Birth: an international environmental treaty produced at the United Nations Conference on Environment and Development (UNCED), informally known as the Earth Summit, held in Rio de Janeiro, Brazil, from 314 June 1992 Objective: stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system Legally non-binding, but set framework for future climate talks. It marks the beginning of international collective action against climate change. After 1995, a COP to the UNFCCC was held every year. 7

UNFCCCs Principle of Common but Differentiated Responsibilities

the largest share of historical and current global emissions of greenhouse gases has originated in developed countries, per capita emissions in developing countries are still relatively low, the share of global emissions originating in developing countries will grow to meet their social and development needs.
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COP-3 & the Kyoto Protocol

The Kyoto Protocol to the UNFCCC was adopted by COP-3, in December 1997 in Kyoto, Japan after heated negotiations. It becomes a milestone, for the first time in history setting mandatory emission cutting targets on sovereign states. Under KP, industrialized countries agreed to reduce their collective GHG emissions by 5.2% in 2008-2012 compared to the year 1990. It adheres to the UNFCCC principle of common but differentiated responsibilities. Implementation details were to be worked out in future negotiations. (final details were established in COP7, 2001, in Marrakech)
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Countries in Kyoto Protocols Annex B and their emissions targets

Country EU-15, Bulgaria, Czech Republic, Estonia, Latvia, Liechtenstein, Lithuania, Monaco, Romania, Slovakia, Slovenia, Switzerland USA Canada, Hungary, Japan, Poland Croatia New Zealand, Russia, Ukraine Norway Australia Iceland Target (1990-2008/2012) -8%

-7% -6% -5% 0% +1% +8% +10%

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Kyoto Protocols Flexible Mechanisms

To provide incentives and attract more nations to join the collective actions, the KP introduced three flexible mechanisms. Emission Trading (ET): directly sell emission permits from one Annex B country to another Joint Implementation (JI): an Annex B country implements a project that reduces emissions in another Annex B country, and counts the resulting emission reduction against its own target Clean Development Mechanism (CDM): similar to JI, but the projects should be located in developing countries
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Global Warming Potential (GWP)

CO2: 1 CH4: 23 N2O: 296 HFC-23: 12,000 PFC: 6,500-9,200 SF6: 22,200

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CDM Examples
Chinas First large-scale CDM business: Japan's JMD provides fund, technologies to decompose HFC23 discharged by Juhua. JMD buys emission credits at price of US$6.5 per ton, equivalent to US$255.8 million for seven contractual years based on anticipated annual reduction of 5.62 million tons of CO2 Changshu 3F Co. receives 438 million euros from World Bank for cutting HFC-23 emissions by equivalent of 10.43 million tons of carbon dioxide annually for 7 years
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Case Study: Juhua

1st HFC23 Project: sell CERs to JMD at price of US$6.5/ton (JMD provides fund, technologies), JMD pays $38 million/y, 35% of which goes to Juhua, or 108 million yuan/year. After tax, cost deduction, Juhua got additional net profit of 44 million yuan. 2nd Project: sell CERs to UK Climate Change Capital at minimum price of 9 euro/ton (no tech, fund aid), 5 million tons/year (7 year). Buyer pays 45 million/y, 35% of which goes to Juhua. After tax, cost deduction, Juhua increased profit of 77 million yuan.

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The five principal concepts of the Kyoto Protocol

Commitments. establishing commitments for the reduction of greenhouse gases that are legally binding for Annex I countries, as well as general commitments for all member countries. Implementation. Annex I countries are required to prepare policies and measures for reduction of greenhouse gases in their respective countries. In addition, they are required to increase the absorption of these gases and utilize all mechanisms available, such as joint implementation, the clean development mechanism and emissions trading, in order to be rewarded with credits that would allow more greenhouse gas emissions at home. Minimizing Impacts on Developing Countries by establishing an adaptation fund for climate change. Accounting, Reporting and Review in order to ensure the integrity of the Protocol. Compliance. Establishing a Compliance Committee to enforce compliance with the commitments under the Protocol.
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KPs Economic Implications

Its a 'cap and trade' system Most industrialized countries will devolve their emissions targets to individual industrial entities Starting the global carbon trading Redistributing national interest in favor of developing countries Carbon-intensive economies may be hampered boosting green economy
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Ratifying Kyoto Protocol: Not An Easy Job

KPs Article 25: it enters into force "on the ninetieth day after the date on which not less than 55 Parties to the Convention, incorporating Parties included in Annex I which accounted in total for at least 55% of the total carbon dioxide emissions for 1990 of the Parties included in Annex I, have deposited their instruments of ratification, acceptance, approval or accession."

Ratifying Kyoto Protocol: Not An Easy Job

The KP almost failed to take effect after the United States and Australia announced to withdraw If Russia had refused to ratify, it would not have taken effect EU persuaded Russia through using insentives After ratified by Russia on 18 Nov. 2004, it had backing from industrialized nations representing 61.6 percent of emissions, and took effect on 16 Feb. 2005 Australian Prime Minister Kevin Rudd ratified the Kyoto protocol on 3 Dec. 2007. Up to 16 Oct. 2008, 185 parties had ratified the KP, accounting for 63.7% of emissions from industrial nations It took 5 years to work out the KP, and another 8 years to starting implementing it.

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KP and USA
United States signed the KP during Clinton Administration Bushs not ratifying the KP harms US soft power greatly U.S. is still the largest per capita emitter of carbon dioxide from the burning of fossil fuels More states and local governments join emission limitation actions
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Criticism
Environmentalists: the 5% cut is too low; flexibility mechanism should not be used Some western countries: China, India are not included Economists: Industrialized economies may slow down; cost may be too high Opposition to 1990 baseline and cap-andtrade approach
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Thank You!
Dr. Chen Gang eaicg@nus.edu.sg Tel: 65164181