1. KYOTO PROTOCOL MECHANISMS EURASIA 歐亞 Solicitors and Advocates

2. What is the Kyoto Protocol? The Kyoto Protocol is an agreement made under the United Nations Framework Convention on Climate Change (UNFCCC). Countries that ratify this protocol commit to reduce their emissions of carbon dioxide and five other greenhouse gases, or engage in emissions trading if they maintain or increase emissions of these gases to a 5.37% less than 1999.

3. KYOTO PROTOCOL PARTIES ANNEX 1 Countries: –Developed countries Non- ANNEX 1 Countries: –Non Developed countries

4. Flexibility Mechanisms The Kyoto Protocol defines three innovative “flexibility mechanisms” to lower the overall costs of achieving its emissions targets. These mechanisms enable Parties to access cost- effective opportunities to reduce emissions or to remove carbon from the atmosphere in other countries. While the cost of limiting emissions varies considerably from region to region, the benefit for the atmosphere is the same, wherever the action is taken. Under this system, the amount to which an Annex I Party must reduce its emissions over the five year commitment period (“assigned amount”) is divided into units each equal to one ton of carbon dioxide equivalent.

5. Kyoto mechanisms are: CDM: Clean Development Mechanism.- provides for Annex I Parties to implement projects that reduce emissions in non-Annex I Parties, or absorb carbon through afforestation or reforestation activities, in return for certified emission reductions (CERs, tCERs and lCERs) and assist the host Parties in achieving sustainable development and contributing to the ultimate objective of the Convention. JI: Joint Implementation.- an Annex I Party may implement an emission-reducing project or a project that enhances removals by sinks in the territory of another Annex I Party (with a commitment inscribed in Annex B of the Kyoto Protocol) and count the resulting emission reduction units (ERUs) towards meeting its own Kyoto target.

6. The clean development mechanism (CDM) Provides for Annex I Parties to implement project activities that reduce emissions in non- Annex I Parties, in return for certified emission reductions (CERs). The CERs generated by such project activities can be used by Annex I Parties to help meet their emissions targets under the Kyoto Protocol. Such project activities are to assist the developing country host Parties in achieving sustainable development and in contributing to the ultimate objective of the Convention.

7. Emissions trading (or cap and trade) Is an administrative approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants. A central authority (usually a government agency) sets a limit or cap on the amount of a pollutant that can be emitted. Companies or other groups that emit the pollutant are given credits or allowances which represent the right to emit a specific amount. The total amount of credits cannot exceed the cap, limiting total emissions to that level. Companies that pollute beyond their allowances must buy credits from those who pollute less than their allowances. This transfer is referred to as a trade. In effect, the buyer is being fined for polluting, while the seller is being rewarded for having reduced emissions. The more firms that need to buy credits, the higher the price of credits becomes -- which makes reducing emissions cost-effective in comparison.

8. How de process works in South America In any Annex 1 Country the cost of reducing one ton a year of Co2 is USD 200-500. Specialized brokers seek projects in Non Annex 1 countries to reduce emissions. The whole process takes 8 to 16 months. 1.Presentation of the Project Idea Note or PIN in the Ministry of the Environment or the related governmental organism. 2.The organism will issue the Project Design Document or PDD. 3.Audit of the process to certify the amount of Co2 that will be reduced.

9. Continuation of the Process on the United Nations Development Programme or UNDP After checking that the process will reduce the projected Co2 over the next 6 years the UNPD emits the certificates. The Certificates may be negotiated by the owner. The ownership depends on the “sponsor” of the program. There are 3 kinds of ownership.

10. Ownership of Certificates The company assumes every costs and risks and freely negotiates the Certificates at USD 15-20 Ton/year, depending of the market prices. The company pre sells the Certificates and receives partial help from the buyer (country or broker) at USD 7-9 /ton/year The company pre sells the whole package and receives the agreed price: USD 4-5 /ton/year.

11. FINAL WORDS Because the market is constantly changing it is similar to a stock market. In order to have an attractive project it's required a minimum of 10.000 ton CO2 annually.

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