Kyoto Protocol

The Kyoto Protocol aims to combat climate change by reducing carbon dioxide emissions.

The international community acknowledged the risks of climate change at the 1992 Earth Summit in Rio. The richest countries, unable to sustain a drop in growth yet also responsible for the highest emissions, committed to stabilising their emissions to 1990 levels by 2000. In 1997, the Kyoto Protocol translated this intention into a legally binding, quantitative commitment.

1 - The greenhouse gases concerned are:

- carbon dioxide (CO2) mostly from the combustion of fossil fuels and deforestation,
- methane (CH4) which is mainly produced by livestock farming, rice growing, the disposal of household waste, oil and gas exploitation,
- halocarbon compounds (HFC and PFC) which are refrigerating gases used in air conditioning and cooling systems, aerosol propellant gases,
- nitrous oxide (N2O) produced from the use of nitrogen fertilizers and some chemical processes,
- sulphur hexafluoride (SF6) used, for example, in electric transformers.

The signatory countries known as "annex" countries (developed countries or countries transiting to a market economy, such as Russia) agreed to reduce their greenhouse gas emissions by 5.5% from 1990 levels between 2008 - 2012.

Among these countries, the United States agreed to a 7% reduction, Japan a 6% reduction and the European Union an 8% reduction. After making this commitment, the European Union deemed it necessary to divide the responsibility for reaching this objective among the fifteen Member States. Therefore, between 2008-2012 France must stabilise its greenhouse gas emissions to their 1990 levels.

The Kyoto Protocol took effect (16th February 2005) when a minimum of 55 Climate Change Convention countries deposited their ratification instruments. These countries include developed countries whose carbon dioxide emissions in 1990 represented at least 55% of the total emissions from those countries that year.

Russia also ratified the Kyoto Protocol. Nevertheless, in 2001 the United States, which alone emits 30 to 35% of all greenhouse gas produced by man, decided not to ratify the Protocol. However, the Protocol has already been officially implemented today.

Developed countries have undertaken ambitious commitments. To help these countries reach these objectives the Kyoto Protocol provides "flexibility" mechanisms in addition to the policies and measures that must be implemented nationally.

2 - There are three flexibility mechanisms:

- "emission permits", a provision which allows emission rights to be bought or sold between industrialised countries;
- "joint implementation" (JI) which allows developed countries to invest in other developed countries in order to reduce greenhouse gas emissions outside their national boundaries and to benefit from emission credits generated by the reductions thus obtained;
- the "clean development mechanism" (CDM), which is similar to the previous mechanism except for the fact that investments are made by a developed country in a developing country.

On the international scale, the December 2001 Conference of the Parties in Marrakesh established the eligibility criteria for projects under the joint implementation and clean development mechanisms:

- the project must be "additional", meaning it must generate an actual decrease in emissions for the activity in question compared to what would have been produced if the project was not carried out;
- the host country, which must first have ratified the Kyoto Protocol, must then officially approve the project if it is part of its sustainable development strategy.

In Europe, the EU is completing the process to implement the necessary legal instruments and thus materialise its intention to apply the provisions of the Kyoto Protocol.

3 - The implementation of emission permits and the exchange system

The European emission permit market has existed since 1st January 2005. The exchange system was inaugurated on 1st January 2005 by the 2003/87 "allowance" directive in order to test the market system and to anticipate the commitment period set by the Kyoto Protocol (2008 - 2012). First, it targets CO2 emissions in the sectors that produce the highest emissions (paper, glass, cement, the energy sector and refineries), or 45 to 50% of all industrial CO2 emissions. This concerns approximately 12,000 plants in 25 European Union countries.

The principle is the following: For each period Member States set emission reduction targets for each of the plants concerned through a national allowance allocation plan (called a NAAP), previously approved by the Commission. At the beginning of each period they allocate a given volume of allowances to plant operators based on the emissions for the activities in question. One allowance corresponds to the emission of the equivalent of one tonne of CO2. Two implementation periods are scheduled: 2005 - 2007 and 2008 - 2012.

At the end of each period operators must return the number of allowances corresponding to their CO2 emissions. The economic interest of the allowance system lies in the fact that these allowances are transferable and negotiable. Allowances can, in fact, be exchanged between plant operators. This market tool will favour an effective distribution of the effort between actors affected by the directive. If the costs of reducing their emissions are too high operators could still reach their objectives (i.e. return the number of allowances corresponding to their emissions during the given period) by buying additional allowances from operators whose costs are lower and who may have a surplus to resell (i.e. a number of allowances for a volume of CO2 higher than their emissions during that period).

The market mechanism of emission allowances established on the European level cannot by itself guarantee that each country fulfils its international commitments. Although it targets carbon dioxide, the main greenhouse gas in terms of volume of emissions, it only concerns part of the industrial and energy sectors, excluding the agricultural, transport, residential and service sectors. In France, the last two sectors are the main emitters of greenhouse gases and their emissions continue to increase, unlike the industrial and energy sectors.