BACKGROUND

     At a conference held December 1 - 11 1997, in Kyoto, Japan, the Parties to the UN Framework Convention on Climate Change agreed to an historic Protocol to reduce greenhouse gas emissions by harnessing the forces of the global marketplace to protect the environment.

     The Kyoto Protocol in key respects -- including emissions targets and timetables for industrialized nations and market-based measures for meeting those targets -- reflects proposals advanced by the United States. The Protocol makes a down payment on the meaningful participation of developing countries, but more needs to be done in this area.

EMISSIONS TARGETS

     A central feature of the Kyoto Protocol is a set of binding emissions targets for developed nations. The specific limits vary from country to country, though those for the key industrial powers of the European Union, Japan, and the United States are similar -- 8% below 1990 emissions levels for the EU, 7% for the U.S., 6% for Japan.

     The framework for these emissions targets is based largely on U.S. proposals:

          Emissions targets are to be reached over a five-year budget period as proposed by the U.S., rather than by a single year. Allowing emissions to be averaged across a budget period increases flexibility by helping to smooth out short-term fluctuations in economic performance or weather, either of which could spike emissions in a particular year.

          The first budget period will be the U.S. proposal of 2008-2012. The Parties rejected proposals favored by others, including budget periods beginning as early as 2003, that were neither realistic nor achievable. Having a full decade before the start of the binding period will allow more time for U. S. companies to make the transition to greater energy efficiency and/or lower carbon technologies.

          The emissions targets include all six major greenhouse gases. The EU and Japan initially favored counting only three gases -- carbon dioxide, methane, and nitrous oxide. Ensuring the inclusion of the additional gases (synthetic substitutes for ozone-depleting CFCs) that are highly potent and long-lasting in the atmosphere provides more comprehensive environmental protection and lends more certainty concerning the treatment of the additional gases.

          Activities that absorb carbon, such as planting trees, will be offset against emissions targets. The treatment of these so-called "sinks" was another controversial issue at Kyoto. Many countries wanted sinks to be excluded. The United States insisted that they be included in the interest of encouraging activities like  afforestation and reforestation. Accounting for the role of forests is critical to a comprehensive and        environmentally responsible approach to climate change. It also provides the private sector with low-cost    opportunities to reduce emissions.

INTERNATIONAL EMISSIONS TRADING

     The United States prevailed in securing acceptance of emissions trading among nations with emissions targets. This free market approach, pioneered in the U.S., will allow countries to seek out the cheapest emissions reductions, substantially lowering costs for the U.S. and others.

     Under an emissions trading regime, countries or companies can purchase less expensive emissions permits from countries that have more permits than they need (because they have met their targets with room to spare).  Structured effectively, emissions trading can provide a powerful economic incentive to cut emissions while also allowing important flexibility for taking cost-effective actions.

     The Kyoto Protocol enshrines emissions trading. Rules and guidelines -- in particular for verification, reporting, and accountability -- are to be discussed at the next meeting of the Parties at Buenos Aires in November 1998.

     The inclusion of emissions trading in the Kyoto Protocol reflects an important decision to address climate change through the flexibility of market mechanisms. Led by the United States, the Conference rejected proposals to require all Parties with targets to impose specific mandatory measures, such as energy taxes.

CLEAN DEVELOPMENT MECHANISM

     Another important free market component of the Kyoto Protocol is the so-called "Clean Development   Mechanism" (CDM). The CDM embraces the U.S. proposal for "joint implementation for credit" in developing countries.

     With the Clean Development Mechanism, developed countries will be able to use certified emissions reductions from project activities in developing countries to contribute to their compliance with greenhouse gas reduction targets.

     This Clean Development Mechanism will allow companies in the developed world to enter into cooperative projects to reduce emissions in the developing world -- such as the construction of high-tech, environmentally sound power plants -- for the benefit of both parties. The companies will be able to reduce emissions at lower costs than they could at home, while developing countries will be able to receive the kind of technology that can allow them to grow more sustainably. The CDM will certify and score projects. The CDM can also allow developing countries to bring projects forward in circumstances where there is no immediate developed country partner.

     Under the Clean Development Mechanism, companies can choose to make investments in projects or to buy emissions reductions. In addition, Parties will ensure that a small portion of proceeds be used to help particularly vulnerable developing countries, such as island states, adapt to the environmental consequences of climate change.

DEVELOPING COUNTRIES

     Various Protocol provisions, taken together, represent a down payment on developing country participation in efforts to reduce greenhouse gas emissions:

          Developing countries will be engaged through the Clean Development Mechanism, noted above.      The Protocol advances the implementation by all Parties of their commitments under the 1992 Framework  Convention on Climate Change. For example, the Protocol identifies various sectors (including the energy,    transport, and industry sectors as well as agriculture, forestry, and waste management) in which actions     should be considered in developing national programs to combat climate change and provides for more  specific reporting on actions taken.

     Developing countries may, as a prerequisite for engaging in emissions trading, voluntarily assume binding emissions targets through amendment to the annex of the Protocol that lists countries with targets. The Kyoto Protocol does not include a separate article for nations to voluntarily assume binding emissions targets.

MILITARY EMISSIONS

     The Kyoto Protocol achieves the objectives identified by the Department of Defense where international   agreement was necessary to protect U.S. military operations.

          Emissions from "bunker" fuels (for international maritime or aviation use) are exempted from emssions limits.  Emissions from multilateral operations pursuant to the United Nations Charter are exempted from emissions limits. This includes not only multilateral operations expressly authorized by the UN Security Council (such as Desert Storm, Bosnia, Somalia) but also multilateral operations not expressly authorized that are nonetheless pursuant to the UN Charter, such as Grenada.

          Countries may decide, among themselves, how to account for emissions relating to multilateral operations (for example, U.S. training in another NATO country). This provision avoids the need to use emissions trading to allocate such emissions.

     COMPLIANCE AND ENFORCEMENT

     The Protocol contains several provisions intended to promote compliance. These include requirements related to measurement of greenhouse gases, reporting, and review of implementation.

     The Protocol also contains certain consequences for failure to meet obligations. For example, as a result of a U.S.-proposed provision, a Party not in compliance with its measurement and reporting requirements cannot receive credit for joint implementation projects.

     Effective procedures and a mechanism to determine and address non-compliance are to be decided at a later meeting. For both environmental and competitiveness reasons, the United States will be working on proposals to strengthen the compliance and enforcement regime under the Protocol.
 

Taken from The Bureau of Oceans and International Environmental and Scientific Affairs:

http://www.state.gov/www/global/oes/fs_kyoto_climate_980115.html