After tough negotiations, the Kyoto Conference reached an agreement on a legally binding Protocol under which industrialized countries will reduce their collective emissions of greenhouse gases by 6% below 1990 levels in the commitment period 2008 to 2012.
The agreement allows countries a certain degree of flexibility in how to achieve their emission reduction targets. Specifically, an international "emissions trading" regime will be established that will allow industrialized countries to buy and sell emissions credits amongst themselves. In addition, a "Clean Development Mechanism (CDM)" will enable industrialized countries to finance emissions reductions projects in developing countries and receive credit for doing so.
It is in this context that UNCTAD´s pioneer work on emissions trading can be especially helpful. During the past five years, UNCTAD has produced a number of reports on many of the details of emissions trading systems, reports which demonstrate that emissions trading is the most cost-effective way to achieve agreed "caps" on emissions.
UNCTAD has launched an initiative, with the Earth Council, to begin an initial-phase international greenhouse gas emissions trading programme. Such a pilot trading programme would go a long way to alleviating the concerns expressed by countries, such as China and India, about how emissions trading would work.
In June 1997, UNCTAD and the Earth Council established the Greenhouse Gas Emissions Trading Policy Forum to facilitate a dialogue among a core group of interested government policy-makers, corporate executives and leaders of NGOs for the purpose of launching an initial-phase market for trading in greenhouse gas emission allowances and reduction credits by the year 2000. This would contribute to the early and effective implementation of the Kyoto Protocol.
The Forum has already held two meetings, in June 1997 in Chicago and in November 1997 in Toronto with 80 participants from governments, corporations and environmental NGOs. Governments participating in the Forum include: US, Canada, Norway, the Netherlands, Costa Rica, Germany, New Zealand, Mexico, the United Kingdom, France, Poland, Russia, Ukraine, and Czech Republic. Company executives, mainly from major power corporations, particularly in the US, Canada, France, Norway, and the UK, are also participating.
The Forum has established both a "policy framework" and a "market design and operations" working group, each with a number of task forces to work out specific details. Its approved workplan would enable a market launch to be made in the latter part of the year 2000.
UNCTAD sees a strong relationship between climate protection policy founded on market-based instruments such as emissions trading, and development issues. The international community must find ways to ensure that developing countries can use the cleanest possible energy technologies, and must take into account both, that per capita emissions in developing countries are relatively low and, that many developing countries are providing environmental services to the entire planet but are not being justly compensated for those services. A well-designed emissions trading system and the CDM will go a long way to meeting those objectives.
