Description of the Kyoto system

The Kyoto system

The fight against climate change can only be successful with a global effort. The United Nations Framework Convention on Climate Change (UNFCCC) signed in 1992 incorporates this common effort, providing a framework on the highest level and coordinating international efforts in the area of climate policy. The Framework Convention has been adopted by basically all UN member states. Under the Framework Convention, the developed industrial countries agreed that in 2000 their greenhouse gas emissions would not exceed the level measured in 1990 and to keep records on their greenhouse gas emissions.

Following many years of political and economic battles, the Kyoto Protocol, attached to the United Nations Framework Convention on Climate Change, entered into force on 16 February 2005, setting out the global reduction of carbon dioxide quantities emitted to the atmosphere by human activity.

The Kyoto Protocol of the United Nations Framework Convention on Climate Change has set up the system on the basis of which the developed countries committed to reducing greenhouse gas emissions. This is the objective represented by the allowed level of emission, the so-called assigned amount. The basic unit of the system is the allowance enabling the emission of greenhouse gas of a quantity corresponding to a global climate change potential equalling one tonne of carbon dioxide or its equivalent, known as carbon dioxide quota in everyday language.

The Kyoto Protocol introduced the trade in quotas (international trade in emission allowances) between developed countries that are signatories of the Protocol, i.e., the developed industrial countries that have allowed but “unused” emission units may sell their surplus units to countries that emit quantities that are higher than their target set out in the Protocol.

According to current regulation, such trade in quotas is possible in the first commitment period (2008‑2012) determined by the Kyoto Protocol. According to the established carbon market practices, the revenue originating from the sale of Kyoto units may be spent on climate protection purposes in the framework of the so-called Green Investment Scheme (GIS) of the Seller country (this means the support of activities and measures targeting the reduction of greenhouse gas emissions, the increase of their removal by sinks and adjustment to the effects of climate change). The specific areas of investment are stipulated by the purchase and sale contract between the contracting parties.

As a basic principle of the GIS, funding should be provided only for measures that are most effective in reducing the emission of greenhouse gases. These are measures that could not be implemented without GIS funding or not in the appropriate quality (i.e. they would not result in such a degree of emission reduction) – this is called the principle of additionality. It is also important that the emission reduction realised with the funded projects should be accounted for toward the partners purchasing the Kyoto units. It follows that it is necessary to verify and prove the implemented emission reduction in relation to each project. The country’s future possibilities to sell quotas are significantly influenced by the extent of correctness and efficiency in terms of using the revenue originating from the quotas already sold.

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