What is “Kyoto Protocol”?

The Kyoto Protocol is an international agreement linked to the United Nations Framework Convention on Climate Change, which commits its Parties by setting internationally binding emission reduction targets. The Kyoto Protocol was adopted in Kyoto, Japan, on 11 December 1997 and entered into force on 16 February 2005.

Recognizing that developed countries are principally responsible for the current high levels of GHG emissions in the atmosphere as a result of more than 150 years of industrial activity, the Protocol places a heavier burden on developed nations under the principle of "common but differentiated responsibilities. Countries (those listed in Annex I) are legally bound to reduce man-made green house gas emissions by approximately 5 per cent below 1990 levels in the commitment period of 2008 to 2012.

The Kyoto Mechanisms:

Under the Protocol, countries must meet their targets primarily through national measures. However, the Protocol also offers them an additional means to meet their targets by way of three market-based mechanisms.

The Kyoto mechanisms are:

• International Emissions Trading
• Clean Development Mechanism (CDM)
• Joint implementation (JI)

The mechanisms help to stimulate green investment and help Parties meet their emission targets in a cost-effective way.

ABOUT Clean Development Mechanism:

The Clean Development Mechanism (CDM) allows emission-reduction projects in developing countries to earn certified emission reduction (CER) credits, each equivalent to one tonne ofCO2. TheseCERs can be traded and sold, and used by industrialized countries (called as Annex-I Countries) to a meet a part of their emission reduction targets under the Kyoto Protocol.

The mechanism stimulates sustainable development and emission reductions, while giving industrialized countries some flexibility in how they meet their emission reduction limitation targets.

The CDM is supervised by the CDM Executive Board (CDM EB) and is under the guidance of the Conference of the Parties (COP/MOP) of the United Nations Framework Convention on Climate Change (UNFCCC).

India is a Developing country and is a signatory to the Kyoto Protocol. Hence, CERs generated from Indian projects are eligible for trading with Annex-I countries.

What is a CER?

CER or Certified Emission Reduction is a "certificate" given by the CDM Executive Board to the projects in developing countries to certify that they have reduced green house gas emissions equivalent to one ton of carbon dioxide.

Developed countries buy CERs from developing countries under the CDM process to help them in achieving their targets under the Kyoto Protocol.

What countries participate in CDM?

Countries listed in Annex I of the UNFCCC can purchase CDM credits. Non Annex-I countries can host CDM projects.

What are the six green house gases under the Kyoto Protocol?

There are many gases that contribute to the green house effect. The Kyoto Protocol deals with six of them.

There are six green house gases covered by the KyotoProtocol

CERs awarded = Tons of green house gas reduced X Global Warming Potential of the Gas (single line).

How do Annex I countries benefit from CDM?

The clean development mechanism is one of the "three flexibility mechanisms" of the Protocol to help these countries to meet these targets. Instead of Annex I countries reducing emissions in their own nation at a higher cost, they can "buy" emission reduction certificates from projects based out of Non-Annex I countries at a lower cost.

How do developing countries benefit from CDM?

The Kyoto Protocol (Article 12) states:

"The purpose of the clean development mechanism shall be to assist Parties not included in Annex I in achieving sustainable development and in contributing to the ultimate objective of the Convention, and to assist Parties included in Annex I in achieving compliance with their quantified emission limitation and reduction commitments"

The idea was that developed countries get some flexibility in emission reductions in exchange for, to bring in investment in developing countries for projects and technologies that reduce green house gases.

What makes a project eligible for CDM? What is Additionality?

A project is eligible for CDM benefits if the project will result in a net decrease in green house gas emissions – this is called additionality.

Technically speaking a CDM project is additional if "anthropogenic emissions of greenhouse gases by sources are reduced below those that would have occurred in the absence of the registered CDM project activity."

(1) Outline the alternatives to the CDM activity

The developer has to first outline what the possible outcomes of the project are if it doesn`t get CDM benefits – so called "baseline" scenarios the associate green house gas emissions. It must then show that with the CDM project, greenhouse gas emissions are reduced. This reduction in emissions over the baseline is the CERs that the project would generate.

(2) Investment analysis

Once the possible alternatives are outlined, and the CDM project is shown to have lower greenhouse gas emissions, the developer must show that CDM scenario satisfies either:

• It is not a common practice in the region or sector.
• It is the least financially attractive option available OR
• Faces "barriers" preventing implementation if the project was not registered as a CDM project such as either:
• Financial : Such as inability to get bank loans.
• Technological : Lack of infrastructure for implementation or skills/ labour to operate the technology.
• "First of its kind" : No project activity of its type is operational in the region or country.

What is a Baseline?

A baseline for a CDM project gives the greenhouse gases emissions that would have occurred in the absence of the proposed CDM project activity.

There are three approaches to establishing baselines:

• Existing actual or historical emissions, as applicable
• Emission from a technology that represents an economically attractive course of action, taking into account barriers to investment
• The average emissions of similar project activities undertaken in the previous five years, in similar social, economic, environmental and technological circumstances, and whose performance is among the top 20 per cent of their category.

What are the sustainable development criteria for CDM projects?

Sustainable development is a legal requirement of a CDM project. "It is the host party`s (e.g. India`s) prerogative to confirm whether a CDM project activity assists it in achieving sustainable development".

Different countries have different sustainable development criteria. In India, clearance for sustainability is granted by the National CDM Authority (NCDMA) and is spearheaded by the Union Ministry of Environment and Forests (MOEF).

The Indian NCDMA has the following sustainable development criteria:

• Social well being : The project should lead to the alleviation of poverty by generating additional employment, removal of social disparities and leading to improvement in quality of life of people.
• Economic well being : The project should bring in additional investment consistent with the needs of the people.
• Environmental well being : This includes a discussion of impact of the project activity on resource sustainability and resource degradation i.e. reduction of levels of pollution.
• Technological well being : The activity should lead to transfer of environmentally safe and sound technologies that are comparable to best practices.
• It is now mandated by NCDMA to spend at least 2% of the CDM revenues derived from large scale project activities (>15 MW) towards social sustainable development.

What is the CDM Executive Board?

The Executive Board supervises the working of CDM. It meets several times a year. The Board has final say on whether a project is approved or not and lays out procedures and guidelines for CDM.

What is a Designated Operational Entity (DOE)? Who are they?

A Designated Operational Entity (DOE) is a Body accredited by the CDM Executive Board that checks whether projects are fulfilling CDM criteria. A CDM project must be checked by two processes –Validation and Verification.

Validation is done once before project approval. Verification is done periodically after the project has been approved or registered.

A Designated Operational Entity (DOE) is accredited provisionally by the CDM Executive Board, further confirmed by the meeting of the Parties to the Kyoto Protocol.

Validation:

Based on the Project Design Document (PDD), the DOE will evaluate and validate the proposed CDM project, confirming whether:

• Voluntary participation of parties.
• Comments by stakeholders have been invited.
• Project participants have submitted documentation on environmental impacts to the DOE.
• The project will result in reduction in greenhouse gas that is additional.
• A methodology has been adopted in accordance with CDM norms.
• Provisions for monitoring, verification and reporting are in accordance with CDM norms.
• The project complies with all other CDM norms.

The DOE then issues a validation report and requests the CDM Executive Board for registration of the project based on this report. The Project developer pays for this, depending upon the size of the projects. Large scale projects have to pay more according to their size.

Verification:

CDM projects are monitored or "verified" after the project has been registered by the CDM Executive Board. After the project has been registered by the Executive Board, the DOE periodically checks (usually once a year) whether emission reduction has actually taken place. It will then request that the EB to issue CERs accordingly, based on this verification report.

It is only after verification that CERs are actually delivered.

Designated Operational Entities in India:

• TUV SUD
• TUV NORD
• DNV
• SGS
• TUV Rheinland
• BVQI
• SIRIM QAS International
• KBS Certification
• BVCH
• Epic Sustainability etc.,

What is a Designated National Authority (DNA)?

It is an office, ministry, or other official entity appointed by a Party to the Kyoto Protocol to review and give national approval to projects proposed under the Clean Development Mechanism.

India`s DNA is called the National CDM authority (NCDMA).

Structure of the NCDMA:

Chairperson: Secretary (Ministry of Environment and Forests, MoEF)
Member-Secretary: Director (Climate Change), MoEF

Members:

• Foreign Secretary
• Finance Secretary
• Secretary for Industrial Policy and Promotion
• Secretary of the Ministry of New and Renewable Energy Sources
• Secretary of the Ministry of Power
• Secretary of the Planning Commission
• Joint Secretary (Climate Change), Ministry of Environment and Forests (MoEF).