Emissions trading, Kyoto mechanisms and climate change mitigation (SYKE-CCM)

The Kyoto Protocol to the UNFCCC sets legally binding greenhouse gas (GHG) emission limitation commitments to industrialised countries. The Kyoto Protocol offers these countries some flexibility in meeting their obligations by three market-based mechanisms: Joint Implementation (JI), the Clean Development Mechanism (CDM) and International Emissions Trading (IET). CDM and JI are also called project-based mechanisms. These three mechanisms give industrialised countries an opportunity for cost-effective options to reach their Kyoto target.

Emissions trading in the EU (EU ETS) started in January 2005, and it is the largest "cap-and-trade" system in the world. Currently the system covers the energy industry and the energy-intensive industry sectors, such as oil refineries and the pulp and paper industry.  Under the EU ETS, large emitters of carbon dioxide within the EU must monitor and annually report their CO2 emissions, and they are obliged every year to return an amount of emission allowances to the government that is equivalent to their CO2 emissions in that year. The second trading period (2008-2012) of the EU ETS is currently underway. The EU ETS will be extended to cover also the aviation industry in the beginning of 2012.

A key feature in the EU ETS is that it allows companies to use credits generated by CDM and JI projects to some extent to help them comply with their obligations under the system. Of the project-based mechanisms CDM refers to project activities based in developing countries, that do not have a reduction target set in the Kyoto Protocol. These project activities must go through a rigorous review process to generate Certified Emission Reductions (CERs) that can be used by industrialised countries and companies in the EU ETS to reach their emission reduction target. The other project-based mechanism, JI, refers to projects implemented in other industrialised countries. JI projects generate Emission Reduction Units (ERUs).

Project activities under JI and CDM must result in reductions in greenhouse gas emissions that are additional to what would have occurred in the absence of the project. There are currently 1,860 registered CDM projects (situation 20.10.2009) that will generate an estimated 1.66 billion CERs by 2012.  In addition to the registered projects there are 2,836 CDM projects in the validation stage, which will generate an estimated 1.1 billion more CERs, once they are registered. Most of the CDM projects are located in Asia, mainly China and India. There are currently only 73 JI projects that have final determination (equivalent to registration in CDM), that will generate approximately 86.5 million ERUs by 2012. In addition to these projects there are  currently 165 JI projects in the determination stage, which will generate  approximately 264.3 million ERUs in the same period. Most of the JI projects are located in Eastern European countries such as Ukraine and Russia.

Kyoto mechanisms support services

The Finnish Environment Institute (SYKE) has in 2002-2009 provided support services for the implementation of Kyoto mechanisms in Finland through the Finnish Carbon Procurement Programme (Finnder)  for the Ministry of Employment and the Economy, Ministry for Foreign Affairs and Ministry of the Environment. The support services have also included the possibility for SYKE to participate in research and provide expert services related to the use of Kyoto mechanisms. From 1.1.2010 onwards, the support service work will be continued by GreenStream Network Oy.

As one component of the support services, the Finnish Carbon Procurement Programme (Finnder) has acquired carbon credits from JI and CDM projects on behalf of the Government of Finland. Finnder has had  a central role in the fulfillment of the target set for Finland in the Kyoto protocol, which is to stabilize greenhouse gas emissions to the 1990 level in 2008-2012. Finland has signed an Emission Reduction Purchase Agreement (ERPA) with nine CDM and five JI projects. 

More information

Ms. Anna Laine,  Finnish Environment Institute SYKE, tel. +358 400 148 800,  firstname.surname@ymparisto.fi [anna laine]