PMF IAS Test Series for UPSC Prelims Banner Ad
PMF IAS Test Series for UPSC Prelims Banner Ad

UNFCCC, Kyoto Protocol (UNFCCC Summit 1997), Carbon Trading

UNFCCC: United Nations Framework Convention on Climate Change

  • International environmental treaty that came into existence under the aegis of UN.
  • UNFCCC is negotiated at the Earth Summit 1992.
  • Signed in 1992, New York City.
  • As of March 2019, UNFCCC has 197 parties.
  • Role: UNFCCC provides a framework for negotiating specific international treaties (called “protocols”) that aim to set binding limits on greenhouse gases.
  • Objective of UNFCCC: Stabilize greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous consequences.
  • Legal Effect: Treaty is considered legally non-binding.
  • The treaty itself sets no binding limits on greenhouse gas emissions for individual countries.

Global CO2 Emissions

Credits: UCSUSA

  • In 1997, the Kyoto Protocol (3rd COP) was concluded and established legally binding obligations for developed countries to reduce their greenhouse gas emissions.

Kyoto Protocol (COP 3; UNFCCC Summit 1997)

  • The Kyoto Protocol was adopted in Kyoto, Japan, in 1997.
  • India ratified Kyoto Protocol in 2002.
  • The Kyoto Protocol came into force in February 2005.
  • There are currently 192 Parties.
  • USA never ratified Kyoto Protocol.
  • Canada withdrew in 2012.
  • Goal: Fight global warming by reducing greenhouse gas concentrations in the atmosphere to “a level that would prevent dangerous anthropogenic interference with the climate system.”
  • Kyoto protocol aimed to cut emissions of greenhouse gases across the developed world by about 5 per cent by 2012 compared with 1990 levels.
  • The Protocol is based on the principle of common but differentiated responsibilities.
  • Kyoto Protocol is the only global treaty with binding limits on GHG emissions.

What is Common but Differentiated Responsibilities – Kyoto Protocol?

  • It puts the obligation to reduce current emissions on developed countries on the basis that they are historically responsible for the current levels of greenhouse gases in the atmosphere.
CBDR divides countries into two categories.
  1. Historically biggest polluting developed countries like US, UK, France, Japan, Russia etc. (they are polluting the earth since Industrial Revolution).
  2. Recently polluting developing countries like China, India, Brazil, etc. (polluting since 1950s).
  • “Common” Every country (both developing and developed) must take part in the fight against climate change.
  • “But differentiated responsibilities” Historically biggest polluters should do more compared to the recent polluters, i.e., responsibilities proportional to pollution caused.
  • Thus, under CBDR, developed countries like US, UK, Russia etc. must contribute more to reduce GHGs.
  • They must accept to certain binding limits on GHG emissions.
  • They must contribute funds towards reducing GHG emissions in developing and least developed countries.
  • On the other hand, developing and least developed countries should do everything possible to cut down their GHG emissions. But nothing is binding on them, and every initiative is voluntary.

Classification of Parties and their commitments – Kyoto Protocol

Annex I

  • Developed countries [US, UK, Russia etc.] + Economies in transition (EIT) [Ukraine, Turkey, some eastern European countries etc.]

Annex II

  • Developed countries (Annex II is a subset of Annex I).
  • Required to provide financial and technical support to the EITs and developing countries to assist them in reducing their greenhouse gas emissions.

Annex B

  • Annex I Parties with first or second-round Kyoto greenhouse gas emissions targets.
  • The first-round targets apply over the years 2008–2012 and the second-round Kyoto targets, which apply from 2013–2020.
  • Compulsory binding targets to reduce GHG emissions.

Non-Annex I

  • Parties to the UNFCCC not listed in Annex I of the Convention (mostly low-income developing countries).
  • No binding targets to reduce GHG emissions.


  • Least-developed countries
  • No binding targets to reduce GHG emissions.
  • Developing countries may volunteer to become Annex I countries when they are sufficiently developed.

Classification of Parties - Annex I, Annex II – Kyoto Protocol

What is commitment period – Kyoto Protocol?

  • Under Kyoto Protocol, there are two commitment periods:
  1. 2008 – 2012 and
  2. 2013 – 2020.
  • The second commitment period was agreed on in 2012, known as the Doha Amendment to the protocol.
  • Each commitment period has its own binding targets set for developed countries to reduce their GHG emissions.
  • Nations that miss their Kyoto target in 2012 will incur a penalty of an additional third added to whatever cut they agree under a new treaty in Copenhagen.
  • During first commitment period (2008-12), more than 35 countries had binding targets.
  • Canada withdrew in 2012 after the first commitment period.
  • Japan, New Zealand and Russia have participated in Kyoto’s first-round but have not taken on new targets in the second commitment period.
  • As of January 2019, 124 states have accepted the Doha Amendment, while entry into force requires the acceptances of 144 states.
  • Thus, the second commitment period is a failure.
  • Negotiations were held in Lima in 2014 to agree on a post-Kyoto legal framework that would obligate all major polluters to pay for CO2 emissions.
  • China, India, and the United States (three big villains) have all signalled that they will not ratify any treaty that will commit them legally to reduce CO2 emissions.

The Kyoto Protocol emission target gases include

  • Carbon dioxide (CO2),
  • Methane (CH4),
  • Nitrous oxide (N2O),
  • Sulphur hexafluoride (SF6),
  • groups of hydro fluorocarbons (HCFs) and
  • groups of Per fluorocarbons (PFCs).

Flexible Market Mechanisms – Kyoto Protocol

  • Countries bound to Kyoto targets have to meet them largely through domestic action — that is, to reduce their emissions onshore.
  • But they can meet part of their targets through three “market-based mechanisms”.
The Kyoto Flexible Market Protocol mechanisms include:
  1. Clean Development Mechanism (CDM)
  2. Emission Trading
  3. Joint Implementation (JI)

Clean Development Mechanism (CDM) – Kyoto Protocol

  • CDM allows a country with an emission-reduction or emission-limitation commitment under the Kyoto Protocol (Annex B Party) to implement an emission-reduction project in developing countries.
  • Hypothetical E.g. of CDM: Australia takes up or finances some environment benefitting project in India (solar power projects, wind power projects, afforestation etc.) and earns some carbon credits (certified emission reduction credits). Now it shows these earned carbon credits to the world and tells them how it is working towards meeting its Kyoto targets.
  • Such projects can earn saleable certified emission reduction (CER) credits, each equivalent to one tonne of CO2, which can be counted towards meeting Kyoto targets.
  • In simple terms: Developed countries emit more and lose carbon credits. They provide financial assistance to developing and least developed countries to create clean energy (solar, wind energy etc.) and gain some carbon credits thereby meeting their Kyoto Quota (Kyoto units) of emissions without violations.
  • Suppose a developed country has a Kyoto Quota of 100 Carbon Credits, it can emit 100 tonnes of CO2.
  • Due to negligence it emits 110 tonnes of CO2, i.e. 10 carbon credits are lost (Kyoto Quota violation).
  • Now the country has to make up for its lost carbon credits to avoid penalty.
  • So, it invests some money (equal to 10 carbon credits) in developing and LDCs to build clean energy infrastructure like solar plants, wind farms etc. and will make up for its 10 lost carbon credits and avoid penalty.

Clean Development Mechanism (CDM) – Kyoto Protocol

Pic Credits

Carbon Credits Trading [Carbon Trading] – Kyoto Protocol

Carbon credit – Kyoto Protocol
  • A carbon credit (often called a carbon offset) is a tradable certificate or permit.
  • One carbon credit is equal to one tonne of carbon dioxide.
  • Carbon credits are a part of attempts to mitigate the growth in concentrations of GHGs.
  • Carbon credits or carbon offsets can be acquired through afforestation, renewable energy, CO2 sequestration, methane capture, buying from an exchange (carbon credits trading) etc..
  • Carbon trading is the name given to the exchange of emission permits.
  • This exchange may take place within the economy or may take the form of international transaction.
  • Under Carbon Credits Trading mechanism countries that emit more carbon than the quota allotted to them buy carbon credits from those that emit less.
  • In Carbon trading, one credit gives the country or a company right to emit one tonne of CO2.
  • A developing nation such as India, turns out to be a seller of such credits, which eventually provides them with monetary gains.
  • Carbon credits are traded at various exchanges across the world.
  • Multi-Commodity Exchange of India (MCX) launched futures trading in carbon credits in 2009.
Types of Carbon trading
  • Emission trading and
  • Offset trading.
Emission trading/’cap-and-trade’
  • Emissions trading allows countries to sell unused emission units to countries that have exceeded their targets.
  • Carbon is tracked and traded like any other commodity in a “carbon market.”

Other trading units in the carbon market:

  • A removal unit (RMU) by reforestation.
  • An emission reduction unit (ERU) generated by a joint implementation project.
  • A certified emission reduction (CER) generated from a clean development mechanism project activity.
Offset Trading/Carbon Project/’baseline-and credit’ trading
  • Another variant of carbon credit is to be earned by a country by investing some amount of money in such projects, known as carbon projects, which will emit lesser amount of greenhouse gas in the atmosphere.
  • For example, suppose a thermal plant of 800 megawatt capacity emit 400 carbon-equivalent in the atmosphere. Now a country builds up an 800 megawatt wind energy plant which does not generate any amount of emission as an alternative of the thermal plant. Then by investing in this project the country will earn 400 carbon-equivalent.
  • Offset Trading is a variant of Emission Trading or Carbon Trading.
Carbon tax (not related to Kyoto Protocol)
  • It is a tax on all fossil fuels in proportion to carbon dioxide emissions.
  • Proposed in may developed and developing countries.
  • The proposal faced political resistance (politician – corporate nexus, people feared more burden).
  • India has a carbon tax of sorts. Budget of 2010-11 introduced a cess of Rs. 50 per tonne of both domestically produced and imported coal. Later it was increased to Rs. 100.
  • With the introduction of the Goods and Service Tax (GST), the Clean Energy Cess was abolished in 2017.
  • A new cess on coal production, called the GST Compensation Cess of Rs. 400 per tonne is put in place.
  • This cess is used to raise revenues for the National Clean Energy Fund.

Non-Compliance of Kyoto And Penalties

  • If a country does not meet the requirements for measurements and reporting, the country loses the privilege of gaining credit through joint implementation projects.
  • If a country goes above its emissions cap and does not try to make up the difference through any of the mechanisms available, then said country must make up the difference plus an additional thirty percent during the next period.
  • The country could also be banned from participating in the ‘cap and trade’ program.

Joint Implementation (JI) – Kyoto Protocol

  • The mechanism known as “joint implementation,” allows a country with an emission reduction commitment under the Kyoto Protocol (Annex B Party) to earn emission reduction units (ERUs) from an emission-reduction project in another Annex B Party, each equivalent to one tonne of CO2, which can be counted towards meeting its Kyoto target.
  • Joint implementation offers Parties a flexible and cost-efficient means of fulfilling a part of their Kyoto commitments, while the host Party benefits from foreign investment and technology transfer.
Q. Regarding “carbon credits”, which one of the following statements is not correct?
  1. The carbon credit system was ratified in conjunction with the Kyoto Protocol.
  2. Carbon credits are awarded to countries or groups that have reduced greenhouse gases below their emission quota.
  3. The goal of the carbon credit system is to limit the increase of carbon emission quota.
  4. Carbon credits are traded at a price fixed from time to time by the United Nations Environment Programme.
  • Answer d) Carbon credit prices are traded on an exchange. So, their prices are never fixed.

Benefits of Flexible Market Mechanisms

  • Stimulating green investment in developing countries.
  • Including the private sector in this endeavour to cut and hold steady GHG emissions at a safe level.
  • It also makes “leap-frogging” –– possibility to skip older, dirtier technology for newer, cleaner infrastructure and systems, with obvious longer-term benefits.
  • Strengthen the Protocol’s environmental integrity, support the carbon market’s credibility and ensures transparency of accounting by Parties.

Criticism of Kyoto Protocol

  • Under Kyoto Protocol, Annex 1 countries can meet their targets by cutting emissions or buying unused allowances (carbon credits, carbon trading) from other countries. This kind of approach ignores long term social and economic costs. It is like committing only half of what one needs to commit.
  • Kyoto Protocol is based on the “common but differentiated responsibility” approach to global warming. Under CBDR, many countries were allowed to increase pollution.
  • It excluded most polluting countries like China and India, which have since become the world’s largest and fourth largest polluters.

Important UNFCCC Summits Post Kyoto

  • After the Kyoto Protocol, parties to the Convention have agreed to further commitments.
  • CMP: Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol.
  • COP11 / CMP 1 was held in Montreal, Canada in 2005 (Kyoto Protocol was ratified in 2005).

Bali (Indonesia) Climate Change Conference 2007 (COP 13; CMP 3)

COP 13: It is the13th session of the Conference of the Parties to the UNFCCC

CMP 3: It is the 3rd session of the COP serving as the Meeting of the Parties to the Kyoto Protocol.

  • Governments adopted the Bali Road Map.
Bali Road Map included:
  • Reaching an agreed outcome and adopting a decision at COP15 in Copenhagen.
  • The review of the financial mechanism, going beyond the existing Global Environmental Facility.

Poznan (Poland) Climate Change Conference 2008 (COP 14; CMP 4)

  • It launched the Adaptation Fund under the Kyoto Protocol.
  • The Fund is financed in part by government and private donors, and also from a 2% share of proceeds of Certified Emission Reductions (CERs) issued under Clean Development Mechanism projects.

Copenhagen (Denmark) Climate Change Conference 2009 (COP 15; CMP 5)

  • The Copenhagen Accord included the goal of limiting the maximum global average temperature increase to no more than 2 degrees Celsius above pre-industrial levels, subject to a review in 2015.
  • Developed countries promised to provide US$30 billion for the period 2010-2012, and to mobilize long-term finance of a further US$100 billion a year by 2020 from a variety of sources.

Cancún (Mexico) Climate Change Conference 2010 (COP 16; CMP 6)

  • Parties agreed to commit to a maximum temperature, rise of 2 degrees Celsius above pre-industrial levels, and to consider lowering that maximum to 1.5 degrees in the near future.
  • Parties agreed to establish a Green Climate Fund to provide financing to projects, programmes, policies and other activities in developing countries via thematic funding windows.
  • Governments also agreed to include carbon capture and storage (CCS) in the projects under the Clean Development Mechanism (CDM), subject to technical and safety standards.

Durban (Denmark) Climate Change Conference 2011 (COP 17; CMP 7)

  • The outcomes included a decision by Parties to adopt a universal legal agreement on climate change as soon as possible, and no later than 2015.
  • Second phase of Kyoto Protocol was secured.
  • Approved the Governing Instrument for the GCF.
Green Climate Fund
  • COP 16 ==> Decision Made to Establish GCF.
  • COP 17 ==> Parties approved the Governing Instrument for the GCF ==> Legal Approval
  • COP 18 ==> Songdo, Incheon, Republic of Korea will host GCF.
  • The Fund will start operating from 2013.
  • It is a mechanism to redistribute money from the developed to the developing world.
  • GCF will help developing countries financially in adapting mitigation practices to counter climate change.
  • It is intended to be the centrepiece of efforts to raise Climate Finance of $100 billion by 2020.
Q. Which of the following statements regarding ‘Green Climate Fund’ is/are correct?
  1. It is intended to assist the developing countries in adaptation and mitigation practices to counter climate change.
  2. It is founded under the aegis of UNEP, OECD, Asian Development Bank and World Bank

Select the correct answer using the code given below.

  1. 1 only
  2. 2 only
  3. Both 1 and 2
  4. Neither 1 nor 2

Answer: a) 1 only

Doha (Qatar) Climate Change Conference 2012 (COP 18; CMP 8)

  • The conference reached an agreement to extend the life of the Kyoto Protocol, which had been due to expire at the end of 2012, until 2020 (second commitment period 2013 – 2020).
  • The extension of the Kyoto Protocol until 2020 limited in scope to only 15% of the global CO2 emissions.
  • This was due to the lack of participation of Canada, Japan, Russia, Belarus, Ukraine, New Zealand and the United States. (they all refused to join the second commitment period under the Kyoto Protocol)
  • Also, developing countries like China, India and Brazil are not subject to any emissions reductions under the Kyoto Protocol.
  • The conference made little progress towards the funding of the Green Climate Fund.

Warsaw (Poland) Climate Change Conference 2013 (COP 19; CMP 9)

  • The conference led to an agreement that all states would start cutting emissions as soon as possible, but preferably by the first quarter of 2015.
  • The term Intended Nationally Determined Contributions was coined in Warsaw.
  • Further the Warsaw Mechanism was proposed, which would provide expertise, and possibly aid, to developing nations to cope with loss and damage from such natural extremities as heatwaves, droughts and floods and threats such as rising sea levels and desertification.
Sharing is Caring !!

Newsletter Updates

Subscribe to our newsletter and never miss an important update!

Assured Discounts on our New Products!

One comment

Leave a Reply

Your email address will not be published. Required fields are marked *


Never miss an important update!