Project-based mechanisms of the Kyoto Protocol
The Kyoto Protocol also provides for the use of project based flexible mechanisms such as the Joint Implementation (JI) and Clean Development Mechanism (CDM). In order to partially achieve their emissions reduction target, industrial states may carry out projects abroad and set off the emissions reduction against their own target.
JI as well as CDM climate projects can be developed for all six greenhouse gases listed in Kyoto Protocol.
The project-based mechanisms of the Kyoto Protocol
From 13/11/2004 the so-called Linking Directive has been in force. Its full name is Directive of the European Parliament and of the Council amending the Directive establishing a scheme for greenhouse gas emissions allowance trading within the Community, in respect of the Kyoto Protocol's project mechanisms. It enables installation operators participating in EU emissions trading to meet a proportion of their climate protection obligations by taking part in CDM projects in the first trading period (2005-2007) and JI as well as CDM projects during the second trading period (2008-2012). This ruling excludes nuclear power stations and carbon sink projects. Specific rules apply to large dam projects.
On 30/09/2005, the Act on the introduction of project-based mechanisms in accordance with the Kyoto Protocol to the United Nations Framework Convention on Climate Change of 11/12/1997, known as the Project Mechanism Act or ProMechG, came into force, turning the requirements of the EU Linking Directive into national law. ProMechG regulates the recognition of CDM and JI projects in Germany, enabling installation operators to meet their obligations in submitting emissions allowances also by submitting emission credits from CDM (from 2006) and JI projects. The German Environment Agency has been appointed as competent national authority.
Legal Documents (partly in German)
Offsetting certificates from project-based Kyoto Mechanisms
In principle, it is possible for operators of installations subject to emissions trading to fulfil their obligation to submit their annual share of CO2 emissions allowances by using certificates from project-based Kyoto mechanisms, i.e. Emission Reduction Units (ERUs) and Certified Emission Reduction certificates (CERs). No ceiling has been set for the use of these certificates by the EU Emissions Trading Directive. It is substantiated by the respective countries within certain parameters according to the ordinance which determines the use of international certificates (RICE). The German Federal Government set the limit at 22 percent of the total amount of allowances allocated to an installation for the entire 2008-2012 trading period. New market participants and new installations my use certificates up to 4.5 percent of their verified emissions between 2013 and 2020. Existing installations which perform activities that are new to emissions trading in the third trading period or which have added to their capacity significantly may choose: They can use either up to 22 percent of the second trading period’s allocation or 4.5 percent of their verified emissions of the third trading period. Aircraft operators may balance 1.5 percent in total of their surrendered amount for the third trading period with CERs and ERUs. From 2013, however, they have to be exchanged for EUAs in order to be used in the European Emissions Trading System.
At the beginning of a trading period, installation operators can fulfil their obligations without restraint by submitting CERs and ERUs which they had to change to EUAs beforehand, as long as they do not exceed their upper limit over the whole allocation period. At the end of the trading period the obligation can also be fulfilled by a higher amount of these certificates.
CERs, ERUs and EUAs are equivalent certificates. Operators, who have more than the allocated amount of CERs or ERUs, can sell their surplus to other operators and replace them by emission allowances.