1. Introduction to registry systems
under Article 7.4 of the Kyoto Protocol
Pre-sessional consultations on registries
Bonn, 2-3 June 2002
Andrew Howard
UNFCCC secretariat
Technical presentation of text
Relatively new text in its current form
Elements brought together from other texts in the CNT

2. Scope of presentation Kyoto Protocol compliance
Registry system requirements
- registry structures
- transactions
- features for integrity and transparency
Based on document FCCC/CP/2001/13/Add.2:
Decision 19/CP.7 on Article 7.4 (pages 55-72) Para numbers in this presentation refer to this decision
Decision 17/CP.7 on the CDM (see pages on the CDM registry)
Scope is the parts of the Article 7.4 text
conceptual elaboration of AA modalities – from Art7
registries are their operationalisation – from mechs
C&A is database and reports for summarising emission and AA data – for the compliance assessment – from Art8
Doc references
Presentation represents current texts (no dec 5/CP.6)
These could change in future, but this is current stance

3. Compliance with Kyoto Protocol targets
Emissions
Target
Annex B target
Party B is a net seller …
Party A is a net buyer …
Sink additions
Mechanisms subtractions
Mechanisms additions
Sink additions
Annex B target
Target
Emissions

4. Accounting units (paras 1-4)
All units denominated as 1 tonne of CO2 equivalent:
Assigned amount unit (AAU)
Based on the Annex B target (Articles 3.7/8)
AAU
Removal unit (RMU)
Based on carbon sequestration in sinks (Articles 3.3/4)
RMU
ERU
Emission reduction unit (ERU)
converted from AAUs or RMUs as a result of JI projects
Part II of the Art 7.4 text
Registries section is the operationalisation of concepts
First the units ….
AAUs are the first units issued into a registry by the Party
ERUs arise from emission reductions through JI projects
CERs arise from emission reductions through CDM projects
All units = 1 tonne CO2 equivalent
Units can move between Parties / legal entities
Concerned about integrity of system. Why? (someone transfers unit twice, units transferred that don’t exist)
Discrepancies could arise – similar problems faced by other systems of exchange – eg banks, stockmarkets
Solution: accounting system similar to banking system
CER
Certified emission reduction (CER)
issued into the CDM registry as a result of CDM projects

5. Tracking the units through the registry system
Transaction log (operated by the secretariat)
Transactions
ERU
AAU
CER
National registries (operated by Annex I Parties)
Annex I
Bulgaria
Russia
Annex I Canada
Germany
CDM registry (operated by the executive board)
Similar system to that used by banks
AIPs have national registries – duplicated/compatible
Have different kinds of account – held by Party and LEs
Can do transactions between a/cs – in or between registries
Also a CDM registry on behalf of NAIPs
for CDM needs, operated by the executive board
EB issues CERs
transfers of CERs to AIP registries
Transaction log
another computer which monitors transactions as they are proposed and implemented
Unit held in only one account at a time
3 components of registry system need to be (a) electronic and (b) standardized sufficiently to be compatible
A registry is a standardized electronic database for recording and tracking of units (ERUs, CERs, AAUs and RMUs) (para 19)

6. National registry account types (para 21)
Canada
Held by the government
Party account
Held by companies,
organizations or individuals
(if authorized by the Party)
Legal entity a/c
Units transferred here to
count towards compliance
Retirement a/c
Units transferred here to
compensate for net emissions from
sinks or to strengthen targets
Cancellation a/c

7. AAU and RMU issuance (paras 23 and 25)
Calculation of assigned
amount (Articles 3.7/8)
AAU
Bulgaria
Party account
Legal entity A
Legal entity B
Retirement a/c
Cancellation a/c
Calculation of net sequestration (subject to limits!)
(Articles 3.7/8)
RMU
Consider several basic functions of registries
Initial filling of national registry on the basis of AA-3.7/8
Party A issues AAUs into accounts in its registry
each registry has many accounts (for Party or legal entities) and issuance can occur into any of them

8. Transfers and acquisitions under emissions trading (para 30)
Canada
Party account
Legal entity A
Legal entity B
Germany
CER
RMU
ERU
AAU
Once units are in a registry …
can be transferred from account to account
domestically
internationally
Current text says that AAUs, ERUs and CERs may be transferred or acquired in this manner

9. Retirement and carry-overs (paras 34 and 36)
Unused units carried-over in holding accounts to the next commitment period
(paras 36)
Russia
Party account
Legal entity A
Legal entity B
Retirement a/c
Retirement (para 34)
RMU
CER
ERU
AAU
Compliance assessment
Units in retirement account
> =
<
Retirement: AA set aside for compliance purposes
transferred into a retirement account
by Party or legal entity
At end CP, units in retirement account used for Party’s compliance assessment
comparison against emissions during CP
Retired units can’t be transferred back out of the retirement account (may need provision for if not needed for compliance)
After compliance assessment, units that weren’t required can be carried over into the next CP
Emissions 2008 to 2012
Units in retirement accounts not transferable

10. (conversion of AAUs to ERUs)
ERU issuance (para 29)
Russia
Party account
Legal entity A
Legal entity B
Retirement a/c
Cancellation a/c
Germany
Party account
Legal entity A
Legal entity B
Retirement a/c
Cancellation a/c
JI project
(conversion of AAUs to ERUs)
Verification by host Party (track 1) or independent procedure (track 2)
AAU
ERU
ERU
Look at a JI project
Party C implements a project in Party A
Leads to emission reductions verified under Art 6 rules
Party A takes AAUs equal to the emission reduction
converts them into ERUs
transfers them to an account in Party C
No new unit created
Only conversion of an old AAU into a new ERU
(later: serial number links new ERU to old AAU)

11. CER issuance (into the CDM registry)
Participants’ request
CER
CDM registry
Pending account
Share of proceeds (for adaptation and admin costs)
Bolivia account
India account
Canada
Party account
Legal entity A
Legal entity B
Retirement a/c
Cancellation a/c
CER
CDM project
Certification of emission reductions by an operational entity
For CDM projects
Party D implements a CDM project in an NAIP
emission reductions certified under Art 12 rules
CERs issued by EB into pending account of CDM registry
share of proceeds moved to another account (to help NAIPs with adaptation and cover admin costs of CDM)
remainder of CERs distributed to accounts of project participants
in accordance with distribution agreement

12. Cancellation of units to strengthen targets (para 33)
Party account
Legal entity A
Legal entity B
Retirement a/c
Cancellation a/c
Germany
What: Cancelled units are removed from the system and cannot be used for compliance
Who: schools, NGOs, individuals, etc
RMU
CER
ERU
AAU
Units in cancellation accounts may not be transferred or retired
Final function …
Another cancellation
specific removal of units from system so that they cannot be used for compliance purposes by the Party
strengthens Art 3.1 target for that Party
eg. school, NGO
As before for cancellation due to Art 3.3/4 activities …
Cancelled units can’t be transferred or retired

13. Features for integrity and transparency
> to keep track of the units
> to identify the accounts
-----> to ensure the integrity of transactions
> to maintain transparency
serial numbers
account numbers
the transaction log
accessible information
Returning to need for integrity in the system …
Design features in registry …

14. Unique serial numbers for units (para 24, 27 and 29)
AAU
01 CH
RMU
01 CA
ERU
01 PL
CER
01 BO
Commitment period
Party of origin
Unit type
LULUCF activity
Unique number
Project number
Serial numbers …
each unit has a unique one
can follow a unit as it moves between accounts/registries
AAU example
consecutive number makes this AAU unique for this Party
ERU example
project identifier
this links ERU to a specific project
project info on registry of Party hosting the project
CER example
Art 7.4 text gives elements, not order or formats
Number formats are not yet specified - these are examples only

15. Account numbers (para 22)
Party account
Legal entity A
Legal entity B
Retirement a/c
Cancellation a/c
Canada
Unique number
Party CA CA CA CA CA
Similarly, each account has a number
But simpler
Party whose registry it is
unique number

16. Message exchange: International transfer (para 38-43)
Proposal 1
Transaction record containing:
- trans. number
- trans. type
- serial numbers
- account numbers
Instruction / transfer 3
Account in national registry of Party A
Account in national registry of Party B
Proposal
response 2
Confirmation 4
Transaction log
(automated checks)

17. Message exchange: Domestic issuance (para 38-43)
Account in national registry of Party A
Proposal 1
Transaction record containing:
- trans. number
- trans. type
- serial numbers
- account numbers
Proposal
response 2
Confirmation 4
Transaction log
(automated checks)

18. Potential discrepancies (para 42)
The transaction log conducts automated checks for:
units improperly issued or duplicated units
units previously retired/cancelled
units not carried over from the previous commitment period
eligibility of Parties / legal entities
infringements on the commitment period reserve
infringements on the limits for carbon sequestration
The transaction log ensures the integrity of all transactions
Each unit is held in one account at a time
What possible discrepancies is the TL checking for?

19. Publicly accessible information (paras 44-48)
Account information (account type, holder, representative, etc)
JI and CDM project information (on national registries and the CDM registry respectively)
- name
- location
- reports / documentation
Information on holdings and transactions, including on cancellations and retirements
List of legal entities authorized by the Party (national registries)
Each national registry and the CDM registry to have:
interface to allow public access to info
a searchable website?

20. Registries development beyond COP7
Technical standards on the exchange of data between
national registries, the CDM registry and the transaction log
… a decision at COP 8 (Nov 2002)
… before 1 Jan 2007
Establishment of national registries by Annex I Parties
… interim registry by COP 8?
Establishment of the CDM registry by the CDM executive board
Technical standards to enable data exchange
needed for development of nat. regs, CDM reg. and TL (the standardized elements)
need COP adoption?
then adopt at COP8?
National registries
AIP to develop
some AIPs already advanced for domestic trading (these should be compatible with international system)
CDM registry and TL
secretariat to develop?
issuances under CDM prompt start as early as 2003
3 components need parallel development (compatible)
Process for cooperation and exchange (AIP, sec, NAIPs)
… completed by COP 10 (Nov 2004)
Establishment of the transaction log by the secretariat

21. Introduction to registry systems
under Article 7.4 of the Kyoto Protocol
Andrew Howard
UNFCCC secretariat