The Kyoto Protocol www.envido.co.uk

The Kyoto Protocol: the background Save energy, save money, save carbon The prevailing international scientific observation is that continued growth in greenhouse gas concentrations caused by human-induced emissions would generate high risks of dangerous climate change. The Intergovernmental Panel on Climate Change (IPCC) has predicted an average global rise in temperature from 1.4°C to 5.8°C between 1990 and 2100, which would have catastrophic effects for the environment. The United Nations Framework Convention on Climate Change (UNFCCC ) is an international treaty aiming to stabilise greenhouse gas emissions at a level that would ‘prevent anthropogenic interference with the climate system’ (Article 2, UNFCCC). Kyoto is a protocol to the UNFCCC, intended to create a legally binding international agreement, whereby all the participating nations commit themselves to tackling the issue of global warming and greenhouse gas emissions.

The prevailing international scientific observation is that continued growth in greenhouse gas concentrations caused by human-induced emissions would generate high risks of dangerous climate change.

The Intergovernmental Panel on Climate Change (IPCC) has predicted an average global rise in temperature from 1.4°C to 5.8°C between 1990 and 2100, which would have catastrophic effects for the environment.

The United Nations Framework Convention on Climate Change (UNFCCC ) is an international treaty aiming to stabilise greenhouse gas emissions at a level that would ‘prevent anthropogenic interference with the climate system’ (Article 2, UNFCCC).

Kyoto is a protocol to the UNFCCC, intended to create a legally binding international agreement, whereby all the participating nations commit themselves to tackling the issue of global warming and greenhouse gas emissions.

The Kyoto Protocol: aims Save energy, save money, save carbon The ultimate aim of the Kyoto Protocol is the stabilization and reconstruction of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. This is to be achieved by the following methods: legally binding commitments for Annex 1 countries to reduce greenhouse gases, as well as general commitments for all member countries; implementation to meet the Protocol objectives, and to prepare policies and measures which reduce greenhouse gases; increasing absorption of these gases (e.g. through geosequestration and biosequestration) and use all mechanisms available, such as joint implementation, clean development mechanism and emissions trading; being rewarded with credits allowing more greenhouse gas emissions at home; minimizing impacts on developing countries by establishing an adaptation fund for climate change; accounting, reporting and review to ensure the integrity of the Protocol, and enforcing commitment through a compliance committee.

The ultimate aim of the Kyoto Protocol is the stabilization and

reconstruction of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.

This is to be achieved by the following methods:

legally binding commitments for Annex 1 countries to reduce greenhouse gases, as well as general commitments for all member countries;

implementation to meet the Protocol objectives, and to prepare policies and measures which reduce greenhouse gases;

increasing absorption of these gases (e.g. through geosequestration and biosequestration) and use all mechanisms available, such as joint implementation, clean development mechanism and emissions trading;

being rewarded with credits allowing more greenhouse gas emissions at home; minimizing impacts on developing countries by establishing an adaptation fund for climate change;

accounting, reporting and review to ensure the integrity of the Protocol, and enforcing commitment through a compliance committee.

The Kyoto Protocol: So far... As of October 2009, 183 countries and one regional economic organization (the EC have ratified the agreement, representing over 63.9% of the 1990 emissions from Annex I countries. 34 of the 40 Annex 1 countries have committed themselves to a reduction of four greenhouse gases (carbon dioxide, methane, nitrous oxide, sulphur hexafluoride) and two groups of gases (hydroflourocarbons and perfluorocarbons) produced by them to targets that are set in relation to their 1990 emission levels. The protocol was initially adopted on 11 December 1997 at Kyoto, Japan, and entered into force on 16 February 2005.

As of October 2009, 183 countries and one regional economic organization (the EC have ratified the agreement, representing over 63.9% of the 1990 emissions from Annex I countries.

34 of the 40 Annex 1 countries have committed themselves to a reduction of four greenhouse gases (carbon dioxide, methane, nitrous oxide, sulphur hexafluoride) and two groups of gases (hydroflourocarbons and perfluorocarbons) produced by them to targets that are set in relation to their 1990 emission levels.

Emission targets by country Kyoto provides for a 'cap and trade' system which imposes national caps on the emissions of annex I countries. On average, this cap requires countries to reduce their emissions by 5.2% below their 1990 baseline over the 2008 to 2012 period. UNFCCC adopts a principle of "common but differentiated responsibilities.“ *** Under the Protocol, Annex I countries have committed National reduction targets that range from a reduction of 8% for the EU and others to 7% for the United States (non-binding as the US is not a signatory), 6% for Japan and Canada and 0% for Russia. The treaty permits emission increases of 8% for Australia and 10% for Iceland. Britain was meant to commit to a 12.5% decrease, but is actually aiming for 20%.

Flexible implementation The Protocol allows for several "flexible mechanisms“: emissions trading clean development mechanism (CDM), allowing governments or private entities in developed countries to set up emission reduction projects in developing countries. They get credit for these reductions as 'certified emission reductions’ (CERs) , promoting sustainable development on developing countries. joint implementation - Annex I countries meet their GHG emission limitations by purchasing GHG emission reductions credits from elsewhere, through financial exchanges, projects that reduce emissions in non-Annex I countries, from other Annex I countries, or from annex I countries with excess allowances. Although non-Annex I countries have no GHG emission restrictions, these mechanisms mean they have financial incentives to develop GHG emission reduction projects to receive "carbon credits" that can then be sold to Annex I countries, encouraging sustainable development. In addition, the flexible mechanisms allow Annex I countries with efficient, low GHG-emitting industries, and high prevailing environmental standards to purchase carbon credits on the world market instead of reducing greenhouse gas emissions domestically. Annex I countries typically will want to acquire carbon credits as cheaply as possible, while non-Annex I countries want to maximize the value of carbon credits generated from their domestic greenhouse gas projects.

The Protocol allows for several "flexible mechanisms“:

emissions trading

clean development mechanism (CDM), allowing governments or private entities in developed countries to set up emission reduction projects in developing countries. They get credit for these reductions as 'certified emission reductions’ (CERs) , promoting sustainable development on developing countries.

joint implementation - Annex I countries meet their GHG emission limitations by purchasing GHG emission reductions credits from elsewhere, through financial exchanges, projects that reduce emissions in non-Annex I countries, from other Annex I countries, or from annex I countries with excess allowances.

Although non-Annex I countries have no GHG emission restrictions, these mechanisms mean they have financial incentives to develop GHG emission reduction projects to receive "carbon credits" that can then be sold to Annex I countries, encouraging sustainable development.

In addition, the flexible mechanisms allow Annex I countries with efficient, low GHG-emitting industries, and high prevailing environmental standards to purchase carbon credits on the world market instead of reducing greenhouse gas emissions domestically. Annex I countries typically will want to acquire carbon credits as cheaply as possible, while non-Annex I countries want to maximize the value of carbon credits generated from their domestic greenhouse gas projects.

Problems China, India and other developing countries were not included in any numerical limitation of the Kyoto Protocol, because they were not main contributors to the greenhouse gas emissions in the pre-treaty industrialization period. China has since become the largest greenhouse gas emitter. The US, which is a party to UNFCCC, never signed the Kyoto Protocol, despite its responsibility for 36.1% of carbon emission levels of the Annex 1 Countries in 1990, and its positio the largest per capita emitter of greenhouse gases in the world. Emission limits do not include emissions by international aviation and shipping, failing to tackle the contribution to global warming from increased air travel and low cost flights. The cap-and-trade emissions trading system (ETS) set up by the European Union issued so many free emissions allowances that the system had virtually no effect on climate. The excessive supply of allowances led to wild fluctuations in price. Some of Europe’s worst polluters collected windfall profits.

China, India and other developing countries were not included in any numerical limitation of the Kyoto Protocol, because they were not main contributors to the greenhouse gas emissions in the pre-treaty industrialization period. China has since become the largest greenhouse gas emitter.

The US, which is a party to UNFCCC, never signed the Kyoto Protocol, despite its responsibility for 36.1% of carbon emission levels of the Annex 1 Countries in 1990, and its positio the largest per capita emitter of greenhouse gases in the world.

Emission limits do not include emissions by international aviation and shipping, failing to tackle the contribution to global warming from increased air travel and low cost flights.

The cap-and-trade emissions trading system (ETS) set up by the European Union issued so many free emissions allowances that the system had virtually no effect on climate. The excessive supply of allowances led to wild fluctuations in price. Some of Europe’s worst polluters collected windfall profits.

Problems Table change in greenhouse gas emissions in developing countries compared to change in developed countries Country Change in greenhouse gas Emissions (1992-2007) India +103% China +150% United States +20% Russian Federation -20% Japan +11% Worldwide Total +38%

Successes Both private and public industries, and governments are taking climate change seriously. Kyoto has also has been highly significant in initiating a new stage of international cooperation on such a wide scale regarding the future of global climate change. Refusal of certain federal countries to signed the Kyoto Protocol has not prevented states within them from committing to its wider aims. For example, eight Northeastern U.S. states created the Regional Greenhouse Gas Initiative (RGGI),a state level emissions capping and trading program, using their own independently- developed mechanisms. It has promoted investment in dollars and the supply of technology to third world countries by developed countries in order to facilitate climate-related studies and projects. Some individual countries have had notable achievement, for example Germany has cut its greenhouse gas emissions by 22.8%.

Both private and public industries, and governments are taking climate change seriously. Kyoto has also has been highly significant in initiating a new stage of international cooperation on such a wide scale regarding the future of global climate change.

Refusal of certain federal countries to signed the Kyoto Protocol has not prevented states within them from committing to its wider aims. For example, eight Northeastern U.S. states created the Regional Greenhouse Gas Initiative (RGGI),a state level emissions capping and trading program, using their own independently- developed mechanisms.

It has promoted investment in dollars and the supply of technology to third world countries by developed countries in order to facilitate climate-related studies and projects.

Some individual countries have had notable achievement, for example Germany has cut its greenhouse gas emissions by 22.8%.

Implications for UK businesses 1) The Climate Change Levy (CCL) As a result of the Kyoto report, the UK Government introduced the Climate Change Levy (CCL) on all non-domestic use in April 2001. The CCL is charged on certain energy supplies used by the industrial and commercial sectors, agriculture, public administration and other institutional services and organisations. Typically businesses and other organisations pay the CCL through their utilities bills. It is applied at different rates, depending on the energy content of the different sources, as demonstrated in the table below: Source Rate Liquid petroleum 0.07 p/kWh Gas, coal, lignite and coke 0.15p/kWh Electricity 0.43 p/kWh

Implications for UK businesses 2) The Enhanced Capital Allowances (ECA) scheme The ECA scheme enables reduced levels of tax payable on qualifying capital investment made in energy efficient technologies, providing distinct financial advantages to organisations purchasing machinery, equipment and vehicles which comply with the qualifying criteria. Businesses can write off the whole of the capital cost of their investment in these technologies against their taxable profits of the period during which they make the investment. This can deliver a helpful cash-flow boost and a shortened payback period. Enhanced Capital Allowances enable a business to claim 100% first-year capital allowances on their spending on qualifying plant and machinery. Certain businesses which use large amounts of energy can participate in negotiated Climate Change Agreements involving energy efficiency targets, which can result in them achieving up to 80% rebate on the levy. There are three sub-category schemes for ECA's: 1. Energy-saving plant and machinery, 2. Low carbon dioxide emission cars and natural gas and hydrogen refuelling infrastructure, 3. Water.

Implications for UK businesses 2) The Enhanced Capital Allowances (ECA) scheme The ECA scheme enables reduced levels of tax payable on qualifying capital investment made in energy efficient technologies, providing distinct financial advantages to organisations purchasing machinery, equipment and vehicles which comply with the qualifying criteria. Businesses can write off the whole of the capital cost of their investment in these technologies against their taxable profits of the period during which they make the investment. This can deliver a helpful cash-flow boost and a shortened payback period. Enhanced Capital Allowances enable a business to claim 100% first-year capital allowances on their spending on qualifying plant and machinery. Certain businesses which use large amounts of energy can participate in negotiated Climate Change Agreements involving energy efficiency targets, which can result in them achieving up to 80% rebate on the levy. There are three sub-category schemes for ECA's: 1. Energy-saving plant and machinery, 2. Low carbon dioxide emission cars and natural gas and hydrogen refuelling infrastructure, 3. Water.

Implications for UK businesses Cutting carbon emissions involves the use of less fuel, providing a monetary incentive for businesses. British government allocated specific limits for individual companies , where power generators and industrial concerns are permitted to produce a given level of carbon dioxide. If they underproduce, they can sell the unused allocation, whereas if they produce too much, they must either buy someone else’s unused allocation or face fines. There are concerns that Kyoto limitations could cause a competitive handicap for UK, as expanding industrial countries, such as India and China, are not subject to its restrictions.

Cutting carbon emissions involves the use of less fuel, providing a monetary incentive for businesses.

British government allocated specific limits for individual companies , where power generators and industrial concerns are permitted to produce a given level of carbon dioxide. If they underproduce, they can sell the unused allocation, whereas if they produce too much, they must either buy someone else’s unused allocation or face fines.

There are concerns that Kyoto limitations could cause a competitive handicap for UK, as expanding industrial countries, such as India and China, are not subject to its restrictions.

Changes in greenhouse gas emissions

Solutions Encourage and enable businesses of all kinds to take the lead in finding and implementing cost effective measures that will cut greenhouse gas emissions. Reducing cutting carbon emissions as part of a wider business plan/ Encourage emissions trading, allowing companies to emit in excess of their allocation of allowances by purchasing allowances from the market, or selling their surplus allowances should they emit less than their allocation of allowances. In contrast to regulation which imposes emission limit values on particular facilities, emissions trading gives companies the flexibility to meet emission reduction targets according to their own strategy. Tighter emissions targets, closer timetables and more binding regulations. Further research into low carbon technology and alternative sources of fuel, whilst taking into account the potential negative implications their use and production may have regarding greenhouse gas emissions. Consider widening the obligations of Kyoto to include aviation Linking trade and climate legislations.

Encourage and enable businesses of all kinds to take the lead in finding and implementing cost effective measures that will cut greenhouse gas emissions. Reducing cutting carbon emissions as part of a wider business plan/

Encourage emissions trading, allowing companies to emit in excess of their allocation of allowances by purchasing allowances from the market, or selling their surplus allowances should they emit less than their allocation of allowances. In contrast to regulation which imposes emission limit values on particular facilities, emissions trading gives companies the flexibility to meet emission reduction targets according to their own strategy.

Tighter emissions targets, closer timetables and more binding regulations.

Further research into low carbon technology and alternative sources of fuel, whilst taking into account the potential negative implications their use and production may have regarding greenhouse gas emissions.

Consider widening the obligations of Kyoto to include aviation

Linking trade and climate legislations.

Envido works with organisations across all sectors to help them save money and reduce their carbon footprint through better energy management. We offer a fully integrated solution to successfully manage your carbon journey. Envido Visit our website at www.envido.co.uk or contact us directly on +44 (0)207 1990 090 to find out how we can help you reduce your energy costs and carbon footprint. Follow us on Twitter! /Envido Our solution covers: carbon consultancy and programme management energy-saving technology installation, and; employee behavioural change delivery We have enabled clients both large and small across the public and private sectors to save millions of £'s through improved energy and carbon management. Save energy, save money, save carbon

Our solution covers:

carbon consultancy and programme management

energy-saving technology installation, and;

employee behavioural change delivery

We have enabled clients both large and small across the public and private sectors to save millions of £'s through improved energy and carbon management.