Order Code RL33826
Climate Change: The Kyoto Protocol and
International Actions
January 24, 2007
Susan R. Fletcher
Specialist in Environmental Policy
Resources, Science, and Industry Division
Larry Parker
Specialist in Energy Policy
Resources, Science, and Industry Division

Climate Change: The Kyoto Protocol and
International Actions
Summary
The first treaty to address climate change, the United Nations Framework
Convention on Climate Change (UNFCCC), was completed and opened for signature
in 1992. This treaty includes commitments to establish national action plans for
voluntary measures that could reduce greenhouse gas emissions to 1990 levels in
order to begin mitigating possible global warming. The United States was one of the
first nations to sign and ratify this treaty, and it entered into force in 1994.
However, it was soon concluded by parties to the treaty that mandatory
reductions in the six major greenhouse gases (of which carbon dioxide, mainly from
burning of fossil fuels, is the most prevalent) would be required. The resulting Kyoto
Protocol, which was completed in 1997 and entered into force in February 2005,
committed industrialized nations that ratify it to specified, legally binding reductions
in emissions of the six major greenhouse gases. The United States has not ratified
the Protocol, and thus is not bound by its provisions. One provision of the Protocol
that has attracted particular interest among business interests in nations that are
parties to it is for “emissions trading” and other “flexibility” mechanisms in which
nations can contribute to meeting their reductions by purchasing “credits” from other
countries that have reduced their emissions beyond their requirements.
The United States signed the Protocol in late 1998, but President Clinton did not
submit the Protocol to the Senate for approval because conditions outlined by S.Res.
98, passed in mid-1997 — including meaningful participation by developing
countries in binding commitments limiting greenhouse gases — had not been met.
In March 2001, the Bush Administration rejected the Kyoto Protocol, and
subsequently announced a U.S. policy for climate change that relies on voluntary
actions to reduce the “greenhouse gas intensity” (ratio of emissions to economic
output) of the U.S. economy by 18% over the next 10 years.
Each of the industrialized nations listed in Annex B of the Kyoto Protocol has
a specified emissions target. Overall, the collective commitments are to reduce the
Parties’ emissions by at least 5% below their 1990 levels, averaged over the
“commitment period” 2008 to 2012. On a “parallel track” of activities, the United
States took an initiative in 2005, the Asia-Pacific Partnership for Clean Development
and Climate, together with China, India, Japan, Australia, and South Korea, which
is a voluntary effort (though without specific targets) to reduce the greenhouse gas
intensity of their economies through technology cooperation.
As of December 2006, the UNFCCC Secretariat reported that 168 nations and
the European Union have ratified or accepted the Kyoto Protocol. Annual meetings
of the parties continue, and attention during the negotiations has turned in large part
to “next steps” following the end of the commitment period in 2012, as well as a
review of the effectiveness of the Protocol. Major challenges remain to find
agreement on the nature of commitments, if any, that would prove acceptable to all
major players: current parties, developing countries that are major emitters, and the
United States.

Contents
Introduction and Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Key Protocol Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Obligations of All Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Emissions Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Implementation: “Flexibility” Mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Emissions Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Clean Development Mechanism (CDM) . . . . . . . . . . . . . . . . . . . . . . . . 5
Joint Implementation (JI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Carbon “Sinks” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Compliance Mechanism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Prospects for Compliance by Kyoto Protocol Parties . . . . . . . . . . . . . . . . . . . . . . 7
Status of Annex I Countries on Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 7
U.S. Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Asia-Pacific Partnership on Clean Development and Climate . . . . . . . . . . . . . . 12
Focus of Future Negotiations: Next Steps and Post-Kyoto Commitments . . . . . 13
List of Figures
Figure 1. September 2005 Point Carbon Assessment of Compliance
Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Figure 2. 2005 Point Carbon Assessment of Potential Credit Supply . . . . . . . . . . 9
Figure 3. 2005 Point Carbon Assessment of CDM and JI Transactions . . . . . . . 10

Climate Change: The Kyoto Protocol and
International Actions
Introduction and Overview
Responding to concerns that human activities are increasing concentrations of
“greenhouse gases” (such as carbon dioxide and methane) in the atmosphere and
causing potentially damaging climate change, nearly all nations of the world joined
together in 1992 to sign the United Nations Framework Convention on Climate
Change (UNFCCC). The United States was one of the first nations to ratify this
treaty. It included a legally non-binding, voluntary pledge that the major
industrialized/developed nations would establish national action plans aiming to
reduce their greenhouse gas emissions to 1990 levels by the year 2000, and that all
nations would undertake voluntary actions to measure and report greenhouse gas
emissions to the UNFCCC Secretariat.
The parties to the UNFCCC hold annual meetings called Conferences of the
Parties (COPs), at which unresolved issues are negotiated, rules of procedure are
established or amended, and reviews of progress are considered. As scientific
consensus grew that human activities are having a discernible impact on global
climate systems, contributing to a warming of the Earth that could result in major
impacts such as sea level rise, changes in weather patterns, and health effects — and
as it became apparent that many major nations such as the United States and Japan
would not be able to reduce their emissions to 1990 levels by 2000 — parties to the
treaty decided in 1995 that it would be necessary to move beyond voluntary measures
and to enter into legally binding commitments. Negotiations began on a protocol to
establish legally binding limitations or reductions in greenhouse gas emissions. It
was decided by the parties that this round of negotiations would, in keeping with
principles established in the UNFCCC, establish limitations only for the developed
countries — the 38 nations listed in Annex I to the UNFCCC, including the former
Communist countries, plus the European Union, and referred to as “Annex I
countries.” Developing countries are referred to as “non-Annex I countries.”
A basic principle established in the UNFCCC and continuing in negotiations on
the Kyoto Protocol is that parties have “common but differentiated responsibilities”
in dealing with climate change issues, and that first steps in reducing greenhouse gas
emissions should be taken by the Annex I countries. Because developed countries
have emitted the largest share of the greenhouse gases already in the atmosphere
(carbon dioxide releases remain in the atmosphere for many decades), and because
they are wealthier and more able to incur costs of any necessary changes in their
economies, it was agreed by negotiators of the UNFCCC, and subsequently the
Kyoto Protocol, that this principle would be a basic tenet of climate negotiations.

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The Kyoto Protocol negotiations were completed in late 1997. The protocol
establishes legally binding, mandatory emissions reductions for the six major
greenhouse gases1. It requires that Annex I countries (listed again in Annex B of the
Protocol) reduce their aggregate greenhouse gas emissions by 5% below 1990 levels
(1990 is the baseline for carbon dioxide, methane, and nitrous oxide; 1995 is the
baseline year for the other 3 gases), averaged over the “commitment period” of 2008
to 2012. Each country was assigned individually negotiated targets which differed
according to their situations.
The United States signed the Protocol in 1998. However, no country is subject
to the provisions of a treaty until it has been ratified, which in the United States
requires the consent of the U.S. Senate. Because the Senate was on record in mid-
1997 in S.Res. 98, objecting to a treaty that had no mandatory obligations for
developing countries, President Clinton did not submit the Protocol to the Senate for
advice and consent; therefore the United States did not ratify the Protocol during his
Administration. Then in March 2001, soon after President George W. Bush took
office, he rejected the Kyoto Protocol, and the United States declined further
participation in Kyoto Protocol negotiations. After several years, the required
number of Annex I countries had ratified (all but the United States and Australia),
and the Protocol entered into force in February 2005. As of December 2006, 168
nations plus the European Union had ratified the Protocol, representing 61.6% of
Annex I countries’ 1990 greenhouse gas emissions. Since the United States has not
ratified the Protocol, it is not subject to its terms.
Negotiations continued after the 1997 treaty was finalized in order to put in
place the detailed rules for how the Kyoto Protocol would operate and to establish
procedures for how its provisions would be carried out. These negotiations were
continued through two subsidiary bodies that address technical issues, and then
decisions were made at the annual conferences of the parties (COPs) to the UNFCCC
until February 2005 when the Kyoto Protocol had achieved the necessary ratifications
to enter into force; the annual meeting is now a UNFCCC COP, combined with a
“meeting of the parties (MOP)” to the Protocol. Thus the annual meetings are now
referred to as COP/MOP meetings. The United States continues to participate in the
discussions and negotiations of the COPs, but as it is not a party to the Kyoto
Protocol, it does not participate in Kyoto-related negotiations.
1 The six gases covered by the Protocol are carbon dioxide (CO ), methane (CH ), nitrous
2
4
oxide (N O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulphur
2
hexafluoride (SF ). The most prominent of these, and the most pervasive in human
6
economic activity, is carbon dioxide, produced when wood or fossil fuels such as oil, coal,
and gas are burned. Concentrations of carbon dioxide in the atmosphere have increased
from 280 parts per million (ppm) in 1850 to some 380 ppm in 2006.

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Key Protocol Provisions
The major commitments in the treaty on the key issues are as follows:
Obligations of All Parties
The Kyoto Protocol calls on all Parties — developed and developing — to take
a number of steps outlined in Article 10 to contribute to scientific research and
monitoring of the climate system and greenhouse gases in their countries. They are
also committed to formulate national and regional programs to improve local
emission factors; carry out steps to promote and transfer environmentally sound
technologies; strengthen national capacity building activities; and conduct national
inventories of greenhouse gas emissions and sinks that remove these gases from the
atmosphere.
In keeping with the principle of common but differentiated responsibilities, the
UNFCCC and the Kyoto Protocol recognize the relatively low per capita greenhouse
gas emissions in developing countries, and the need to take into account the
development activities of these countries that will require increased energy use. The
Protocol does not impose any binding requirements on developing countries; the
commitments in Article 10 are regarded as essentially voluntary.
Obligations to reduce greenhouse gas emissions by Annex I countries are the
focus of most of the Kyoto Protocol, which outlines the legally binding emissions
reductions that the Parties to the treaty are to undertake, and provides for
development of procedures and rules that apply to Parties as they move toward
meeting these binding obligations. These are briefly summarized below.
Emissions Reductions
The Kyoto Protocol states that Annex I Parties are committed — individually
or jointly — to ensuring that their aggregate anthropogenic carbon dioxide equivalent
emissions of greenhouse gases do not exceed amounts assigned to each country in
Annex B, “with a view to reducing their overall emissions of such gases by at least
5% below 1990 levels in the commitment period 2008 to 2012.” Negotiations on the
Kyoto Protocol included a nation-by-nation allocation of the percentage each Annex
I country would be obligated to reduce its greenhouse gas emissions in order to
collectively reach the overall 5% reduction agreed to in the Protocol.
Annex B to the Kyoto Protocol lists 39 nations, including the United States, the
European Union plus the individual EU nations, Japan, and many of the former
Communist nations (the same countries as Annex I to the UNFCCC). The amounts
for each country are listed in this annex as percentages of the base year, 1990 (except
for some former Communist countries, which use a more recent year), and range
from 92% (a reduction of 8%) for most European countries — to 110% (an increase
of 10%) for Iceland. In negotiations on the Protocol, the United States agreed to a
commitment on this list to 93%, or a reduction of 7% below 1990 levels. These
commitments refer to averages that would be below each Party’s 1990 levels for
three major greenhouse gases, including carbon dioxide, (and below 1995 levels for

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the three other, man-made gases), averaged over the “commitment period” 2008 to
2012. (As noted above, only nations that ratify the Protocol are subject to its terms;
the United States later rejected participation, and thus is not bound by it.)2
However, two of the most difficult issues unresolved in 1997 at Kyoto and still
under discussion are related to counting emissions of a nation, specifically how to
take into account: (1) emissions trading — specifically, how much of a country’s
obligation to reduce emissions can be met through purchasing credits from outside,
vs. taking domestic action; and (2) the extent to which carbon sequestration by
forests, soils and agricultural practices can be counted toward a country’s emission
reductions. These are discussed below.
Implementation: “Flexibility” Mechanisms
Emissions Trading. Emissions trading is one of three “flexibility”
mechanisms contained in the Kyoto Protocol (article 17).3 Under the Kyoto Protocol,
developed countries are given greenhouse gas emissions “budgets” (or emissions
“caps”) for the compliance period 2008-2012 based on a percentage of their 1990 or
1995 emissions levels (depending on the particular greenhouse gas). If a country
determined that it would exceed its emissions limit during the compliance period,
emissions trading would permit it to purchase emissions reductions “credits”4 from
another country that determined it would achieve more emissions reductions than
necessary to comply. With emissions trading, countries that can make relatively
inexpensive emissions reductions have an incentive to reduce emissions below the
level required by the Kyoto Protocol, and sell the extra credits to other countries
whose emissions control costs are more expensive. Thus, both the seller and the
buyer would have lower costs by virtue of the seller’s profit and the buyer’s savings.
This type of implementation scheme is commonly called a “cap-and-trade” program.5
This mechanism, however, comes with significant restrictions under the Kyoto
Protocol. First, emissions trading is restricted to countries that have legally binding
2 When the United States signed the Protocol, and based on projections of the growth of
emissions using current technologies and processes, the reduction in greenhouse gas
emissions required of the United States would likely have been between 20% and 30%
below where it would be otherwise by the 2008-2012 commitment period. However,
inclusion of greenhouse gas sinks [Greenhouse gases, especially CO , are absorbed by a
2
number of processes in forests, soils, and other ecosystems. These are called “sinks.”] —
which the Protocol adopted as urged by the United States — and emissions trading, means
that the domestic U.S. emission reductions from fossil fuels needed to meet a 7% target
would have been substantially less.
3 The other mechanisms are Joint Implementation (Article 6) and the Clean Development
Mechanism (Article 12).
4 A credit would generally represent the reduction of one metric ton of carbon dioxide
equivalent emissions.
5 For a detailed discussion, see CRS Report RL33799, Climate Change: Design Approaches
for a Greenhouse Gas Reduction Program
, by Larry Parker.

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greenhouse gas emission limitations — the Annex 1 parties, which as noted above
includes only developed, industrialized countries that have ratified the Protocol.6
Another requirement is that emissions credits must “be supplemental to domestic
actions for the purpose of meeting quantified emission limitations and reduction
commitments....”7 However, the Protocol is vague as to what “supplemental” means,
and the term is subject to continuing interpretation.
Currently, the largest emissions trading scheme in use under the Kyoto Protocol
is the European Union’s Emissions Trading system (ETS). The EU-ETS is a
cornerstone of the EU’s efforts to meet its obligation under the Kyoto Protocol, and
it currently covers more than 11,500 energy-intensive facilities across the now 27 EU
Member countries, including oil refineries, powerplants over 20 megawatts in
capacity, coke ovens, and iron and steel plants, along with cement, glass, lime, brick,
ceramics, and pulp and paper installations. Covered entities emit about 45% of the
EU’s carbon dioxide emissions. The trading program does not cover emissions of
non-CO greenhouse gases, which account for about 20% of the EU’s total
2
greenhouse gas emissions. The first trading period began January 1, 2005. A second
trading period is scheduled to begin in 2008, covering the period of the Kyoto
Protocol, with a third period planned for 2013.8
Clean Development Mechanism (CDM). The Kyoto Protocol supplements
the cap-and-trade implementation scheme discussed above with two project-based
schemes that permit Annex 1 countries to obtain additional credits that they can use
to meet their emission caps. The first is CDM — the only mechanism under the
Kyoto Protocol that involves non-Annex 1 countries. Under its provisions,
industrialized countries can receive Certified Emissions Reduction credits (CERs)
for reductions achieved from a greenhouse gas reduction project in a “host” non-
Annex 1 country. CERs can then be used by the industrialized country to meet its
compliance requirements. The process is overseen by a CDM Executive Board that
registers and validates projects, issues CERs, and manages a series of panels and
working groups. A critical component of the process is the requirement that CERs
issued under the CDM represent only reductions in excess of those that would have
occurred in the absence of the project. CERs can be issued from appropriate projects
initiated after 2000. In 2005, China, India, and Brazil were estimated by Point
Carbon to be responsible for about 63% of the total volume of all projects at the
Project Design Document (PDD) stage of development.9 In the case of China, large
6 Although called “Annex 1” countries in reference to Annex 1 of the Framework
Convention on Climate Change (FCCC), the correct reference is to Annex B of the Kyoto
Protocol. The lists of countries in Annex 1 and Annex B are very similar, but not identical.
CRS uses the common usage term, Annex 1, in this report.
7 Article 17, Kyoto Protocol.
8 For more information, see CRS Report RL33581, Climate Change: The European Union’s
Emission Trading System (EU-ETS)
, by Larry Parker.
9 Point Carbon, Carbon 2006: Towards a Truly Global Market (26 February 2006), p. 14.
Point Carbon is a company that provides in-depth analysis, forecasting, market intelligence
and news about carbon emission markets.

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volumes of CDM contracts are primarily the result of a few large HFC-23 reduction
projects.
Joint Implementation (JI). In contrast, JI is a program in which
industrialized countries can receive Emission Reduction Units (ERUs) from
greenhouse gas reduction projects conducted jointly between two Annex 1 countries.
Like CERs, ERUs can be used by the participating countries for compliance
purposes. There are two tracks under JI (called Track 1 and Track 2). Track 2
mirrors the process used by the CDM but involves different institutions. Track 1 is
a simplified process that puts more of the responsibility on the host country. Like the
CDM, ERUs issued under JI must represent reductions achieved in addition to those
that would have occurred in the absence of the project. Unlike CDM projects, ERUs
can only be transferred beginning in 2008. Romania has been the most active host
JI country. However, it should be noted that in 2005, the volumes involved in the
project markets were overwhelmingly the result of CDM projects, which accounted
for 93% of tonnage transacted (397 million metric tons (MMt) compared with 28
MMt for JI).10
Carbon “Sinks”
One of the most contentious issues in the negotiations over Kyoto Protocol rules
has been how to give nations credit for carbon “sinks”: forests and land uses that
absorb (sequester) carbon from the atmosphere and have the effect of reducing the
net additions a country makes to atmospheric CO levels. This has been negotiated
2
under the term “Land Use, Land Use Change and Forestry” (LULUCF). Issues
include how to allocate credit for existing forest cover (of which some nations, like
the United States, have a great deal and others have very little) and what actions in
relation to LULUCF would constitute legitimate carbon reductions. Only increased
sequestration above 1990 levels, achieved by specific sequestration activities, would
be counted.
The final decisions were that only certain activities would be eligible for use as
offsets against Protocol obligations: afforestation (planting forest cover where there
had been none); reforestation (re-planting tree cover where it had been removed);
deforestation prevention; forest management; cropland management; grazing land
management; and revegetation. The rules of the Protocol do not put an overall cap
on sinks for countries, but instead incorporated country-specific limits on each of the
categories of sinks activities, listed in an Appendix Z. Exactly how carbon absorbed
in sinks will count toward a nation’s obligations is still the subject of on-going
discussion and refinement.
Compliance Mechanism
Achieving agreement among Kyoto Protocol negotiators on compliance — in
particular, penalties for non-compliance by Annex B Protocol parties — was
difficult, and took several years after the Protocol was finalized in 1997. This was
one of several controversial issues that was resolved as part of the Marrakech accords
10 Point Carbon, Carbon 2006: Towards a Truly Global Market (26 February 2006), p. 22.

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at the COP-7 meeting in 2001. In the final rules on compliance, parties agreed that
if a Party falls short of its emissions target during the first commitment period (2008
to 2012), it must make up the difference in the second commitment period plus a
penalty of 30%. Such a party will lose its eligibility for emissions trading, and must
develop a “compliance action plan.”
This decision included establishment of a Compliance Committee, composed
of a plenary, an operational bureau, and two branches: the Facilitative Branch and the
Enforcement Branch. The Facilitative Branch is intended to provide advice and
assistance to Parties, and to provide an “early warning” to Parties that may be in
danger of not complying; the Enforcement Branch would have the responsibility of
applying consequences for Parties that do not meet their commitments. A Protocol
rulebook provides procedures for considering cases of non-compliance or possible
non-compliance, and a procedure for reviewing the cases regarding eligibility to
participate in the Protocol’s financial and other mechanisms.
Compliance involves not only meeting emissions reductions commitments, but
also preparation of adequate GHG inventories and several other procedural
requirements, for which there are no penalties. However, the mechanism’s penalties
for failure to meet emissions reductions targets would come into play only when the
commitment period is well underway; there remain a number of uncertainties as to
how it will function. It does appear, as discussed below, that many parties to the
Protocol may find that achieving their emissions reductions obligations will prove
to be difficult or impossible within the commitment period.
Prospects for Compliance by Kyoto
Protocol Parties
As parties to the Kyoto Protocol contemplate future commitments in the post-
2012 period, often called “post-Kyoto commitments,” the question of whether
existing commitments are likely to be met is important. This section reviews the
status of the parties to the Protocol in relation to their existing commitment and
current GHG emissions. Many are facing major challenges to achieving emissions
reductions, given the increase in emissions they have had in recent years.
Status of Annex I Countries on Compliance
The Kyoto Protocol mandates compliance over a five-year averaging period —
2008 to 2012. Thus, it is an uncertain business attempting to forecast what countries
will be achieving throughout the entire compliance period. For example, in
September 2005, Point Carbon did an assessment of compliance efforts and policies
of all countries that are expected to fall short of their Kyoto targets. As noted by
Point Carbon, the assessment was a snapshot of the situation — countries are refining
their policies continuously and, in the case of the EU, compliance will be determined


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on an EU-15 basis (the EU bubble).11 As indicated in Figure 1, the assessment does
indicate that several countries are challenged in meeting their Kyoto commitments.
In particular, countries in southern Europe, such as Italy and Spain, are forecasted to
have emissions substantially above the targets assigned to them under the EU bubble.
In contrast, countries like Sweden and the United Kingdom are anticipated to achieve
or maintain lower than required emission levels during the compliance period.
For the EU, the situation puts considerable pressure on the European
Commission’s (EC) current review of Member countries’ National Allocation Plans
for the Kyoto commitment period. The EU has consistently stated that it will meet
its commitments under the Kyoto Protocol and is currently developing targets for the
post-2012 period.
Figure 1. September 2005 Point Carbon Assessment of Compliance Efforts
Source: Point Carbon, Carbon 2006: Towards a Truly Global Market (February 2006), p.
7.
Because of the flexibility mechanisms discussed above, potential compliance
with Kyoto is not necessarily threatened by emissions growth in some countries,
since such nations can purchase emissions credits to offset some of their emissions
increases. Indeed, current analyses of credits available from economies in transition
(mostly eastern European countries) indicate that sufficient surplus credits will exist
11 Permitted under the Kyoto Protocol, a “bubble” is a regulatory device that permits two or
more countries to be treated as one for purposes of the Protocol — their emissions can be
averaged in order to reach their targets.


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in such countries to cover the deficit created by emissions growth in other countries.
Specifically, as indicated by Figure 2, surplus credits are anticipated in Russia,
Ukraine, and other eastern European countries — sufficient surplus credits for other
countries anticipated to have deficits (such as parts of the EU, Japan, Canada, and
New Zealand) to purchase them in order to cover their compliance requirements.
Figure 2. 2005 Point Carbon Assessment of Potential Credit Supply
Source: Point Carbon, Carbon 2006: Towards a Truly Global Market (February 2006), p.
8.
This long position with respect to credits does not include anticipated CERs and
ERUs from CDM and JI projects. As indicated by Figure 3, the potential for
additional credits from these sources is substantial, particularly from China. Of
course, there is a range of risk with respect to these sources (including the possibility
that any given project may not be built or may not be certified as valid for issuing
CERs or ERUs), but indications are that additional credits will be available from
these sources.
There are some potential potholes on the road to compliance. Perhaps the most
important is the requirement that credits gained through emissions trading and joint
implementation be “supplemental to domestic actions.” This requirement under
Article 17 has been subject to extensive discussion and interpretation. Resisting
efforts by the EU to place a quantitative limit on the procurement of credit via these
mechanisms, the Conference of Parties decided to put no quantitative limit on such
mechanisms, but that “the use of the mechanism shall be supplemental to domestic
action and domestic action shall thus constitute a significant element of the effort


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made by each party.”12 No means of determining the significance of domestic actions
has been finalized. The EU as a whole has taken a strict interpretation of
“supplementarity” (although some individual countries have indicated they would
like to use the mechanism more extensively), while other countries, such as Japan,
are anticipated to use the mechanisms substantially in meeting their requirements.
Figure 3. 2005 Point Carbon Assessment of CDM and JI Transactions
Source: Point Carbon, Carbon 2006: Towards a Truly Global Market (February 28, 2006)
p. 23.
Another major issue to be resolved is the volatility of the credit markets at the
current time. Credit prices for the ETS have ranged from less than 5 euro a ton to
about 30 euro a ton — currently the price is less than 5 euro. Such volatility makes
planning, implementation, and participation in emissions reduction programs
difficult.
12 Preparations for the first session of the Conference of the Parties serving as the Meeting
of the Parties to the Kyoto Protocol (Decision 8/CP.4): Decision 5/CP.6 implementation of
the Buenos Aires Plan of Action
, FCCC/CP/2001/1.7 (July 24, 2001).

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U.S. Position
The United States took an active role in the negotiations that shaped the 1997
Kyoto Protocol. It signed the Protocol in 1998, but President Clinton did not submit
it to the Senate for approval, citing the Byrd-Hagel resolution, S.Res. 98, that passed
unanimously just prior to the completion of the Protocol in Kyoto. This non-binding
resolution expressed the sense of the Senate that it would not support a treaty that did
not include obligations for developing countries, or that would harm the U.S.
economy.
In March 2001, President George W. Bush rejected the Kyoto Protocol, and the
United States has not formally participated in further negotiations on the Protocol.
Until 2005, meetings to negotiate details and procedures of the Kyoto Protocol’s
rules occurred annually in conjunction with the conference of parties (COP) to the
UNFCCC. The United States attended these meetings and participated in discussions
or negotiations pertaining only to the UNFCCC; it also has been active behind the
scenes in discussions of Kyoto Protocol issues, but has not formally participated.
Regaining U.S. participation and ratification of the Kyoto Protocol remains a major
goal for parties to the Kyoto Protocol, along with engaging major developing country
participation, since meaningful reduction in global greenhouse gas emissions will
depend on reductions in emissions by the largest emitters.
In February 2002, President Bush announced a U.S. policy of reducing the net
“greenhouse gas intensity” of the U.S. economy by 18% over the next 10 years.13
Greenhouse gas intensity measures the ratio of greenhouse gas emissions to
economic output. GHG intensity has been declining in the United States, and the
18% reduction goal compares to a projected “business as usual” decline in intensity
of 14%14 for the 10-year period. According to some, the 18% goal would not achieve
reductions of greenhouse gases significantly more than the existing trend.
The Administration stated that the goal, to be met through voluntary action, is
to achieve efficiency improvements that would reduce the 183 metric tons of
emissions per million dollars of gross domestic product (GDP) expected under
“business as usual” to 151 metric tons in 2012. The plan noted that “if, in 2012, we
find that we are not on track toward meeting our goal, and sound science justifies
further policy action, the United States will respond with additional measures that
may include a broad, market-based program” and other incentives and voluntary
measures to accelerate technology development.
U.S. actions related to climate change include extensive scientific and research
programs15, and continuing international activities to cooperate on a bilateral basis
or through other international forums to support voluntary action. One of the most
13 See the White House website for a summary and discussion of this policy, at
[http://www.whitehouse.gov/news/releases/2002/02/climatechange.html].
14 See CRS Report 98-235, Global Climate Change: U.S. Greenhouse Gas Emissions —
Status, Trends, and Projections
, by John Blodgett and Larry Parker.
15 See CRS Report RL33817, Climate Change: Federal Expenditures, by Jane A. Leggett.

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prominent international U.S. activities recently was the initiative taken in the Asia-
Pacific Partnership on Clean Development and Climate, discussed below.
Asia-Pacific Partnership on Clean Development
and Climate
On July 27, 2005, the United States announced formation of a six-nation Asia-
Pacific Partnership on Clean Development and Climate (commonly denoted by the
acronym ‘APP’), which would work on cooperatively reducing greenhouse gas
intensity of their economies. This partnership agreement included three of the
world’s largest emitters of greenhouse gases: the United States, China, and India,
plus Japan, Australia, and South Korea. Of the three developed country nations in
the partnership — the United States, Australia, and Japan — only Japan has ratified
the Kyoto Protocol.
The participants described the focus of the partnership as technology
development and reduction of greenhouse gas intensity, on a voluntary basis. No
specific targets were announced. The members of the partnership indicated that their
goal was to “complement, but not replace the Kyoto Protocol.” However, concerns
have been raised by some observers as to whether this partnership and its approach
would in fact reinforce the resistance of the two largest developing country
greenhouse gas emitters — China and India — to taking on mandatory emissions
commitments in the next phase of the Kyoto Protocol.
The purposes identified by partnership members include to “Create a voluntary,
non-legally binding framework for international cooperation to facilitate the
development, diffusion, deployment, and transfer of existing, emerging and longer-
term cost-effective, cleaner, more efficient technologies and practices among the
Partners through concrete and substantial cooperation so as to achieve practical
results.”16
Task forces focused on eight industrial or business sectors were established to
review the status of their sectors with regard to clean development and climate, to
identify cost and performance objectives and realistic goals, and report on
recommended actions within their sectors. The eight Task Forces are: (1) Cleaner
Fossil Energy, (2) Renewable Energy and Distributed Generation, (3) Power
Generation and Transmission, (4) Steel, (5) Aluminum, (6) Cement, (7) Coal Mining,
and (8) Buildings and Construction. The task force reports, termed Action Plans, are
now complete and can be accessed on the partnership website.
The Executive Summary of the Task Force Action Plans describes the projects
to be undertaken, which include sectoral assessments, identifying best practices,
capacity building, and technology research and demonstration. These activities are
16 Extensive information about the partnership is available on its website at
[http://www.asiapacificpartnership.org].

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described as “a significant first step toward a more comprehensive set of actions to
address clean development and climate goals.17
The remaining questions include the degree to which funding and investment
will be forthcoming for the work plan goals. Also unclear is the degree to which the
developing country partners will undertake activities in addition to those receiving
outside funding. Another question — critical to the future of the Kyoto Protocol, and
raised initially when the partnership was first announced — is whether the two
largest developing country emitters of greenhouse gases, China and India, will see
this parallel effort as indeed complementary to the Kyoto Protocol, or whether they
will continue to resist binding emissions reductions in the next commitment period
of the Kyoto Prtocol in favor of the non-binding, voluntary approach espoused by the
Asia-Pacific Partnership, with greenhouse gas intensity reduction as their focus.
Focus of Future Negotiations: Next Steps and
Post-Kyoto Commitments
The Kyoto Protocol was always intended to be a first step in moving toward
reducing global accumulations of greenhouse gases in the atmosphere. Negotiators
recognized that the goals of the Protocol, even if met by all the parties, would not
produce the stabilization of atmospheric greenhouse gases posited as the goal of the
UNFCCC. The Protocol set forth a timetable for reviewing progress of actions
undertaken to meet the Protocol’s goals and to consider “next steps.” It has been
generally anticipated that next steps after 2012 would consider measures to be taken
by both developed and developing countries. Throughout the process developing
countries have been unwilling to make binding commitments on greenhouse gas
limitations or management.
At the first “Meeting of the Parties” of the Kyoto Protocol in
November/December 2005 (the 11th COP of the UNFCCC) — COP-11/MOP-1 —
in Montreal, Canada, both the United States and developing countries were resistant
to the idea of negotiating new legally binding commitments for the post-Kyoto (after
2012) period.18 The Kyoto Protocol parties were also reluctant to discuss new
commitments in the post-Kyoto period if they did not include all the major emitters
— including the United States, China and India. By the end of that meeting a
compromise was reached in which two processes were set in motion to consider next
steps:
! An “Ad hoc Working Group” (AWG) was established under the
Protocol to begin consideration of next steps for developed country
17 See Executive Summary at [http://www.asiapacificpartnership.org]. This Summary
provides examples of projects identified by each Task Force’s action plans.
18 For more detailed summaries of the COP and COP/MOP meetings, see the reports of the
Earth Negotiations Bulletin (ENB) at [http://www.iisd.ca/process/climate_atm.htm] and the
Pew Center on Climate Change at [http://www.pewclimate.org/what_s_being_done/
in_the_world/reports/cops.cfm].

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parties in the Post-Kyoto period; since the United States is not a
party to the Protocol, it does not play a role in this process (except,
of course, as an observer — from which vantage point its position
has generally been made known and generally taken into account by
the parties).
! A non-binding, two-year “dialogue on long-term cooperation” was
launched under the auspices of the UNFCCC that includes the
United States and all parties to the UNFCCC (virtually all of the
world’s countries). The decision on establishing the dialogue
specifically ruled out including any negotiations leading to new
commitments. Its goals are to support implementation of existing
commitments under the Convention, support voluntary actions by
developing countries, and to support development of national and
international responses to climate change. The areas of focus for
these discussions are: sustainable development, adaptation,
technology development and transfer, and market-based
opportunities.
Both of these processes involve workshops and meetings with reports to the
COP/MOP meetings in 2006 and 2007. Neither involves any deadlines for
completion of the discussions or negotiations.
At COP-12/MOP-2 held in Nairobi, Kenya, in November 2006, both the AWG
and the Dialogue were involved in workshops and discussions, and the AWG
formulated a work program for future meetings that involve analytical subjects that
would underlie any consideration of post-2012 targets for developed countries. The
Nairobi meeting also included the beginning of a review of the Protocol’s
effectiveness — a somewhat controversial issue because of the implications the
review process is thought to have for future commitments. Little progress was made
at this COP/MOP, however, and decisions on the scope and content of the review
were put off until the COP/MOP 4 to be held in 2008. Issues related to adaptation
to climate change focused primarily on administration of an Adaptation Fund
established to assist adaptation efforts in developing countries.
The Kyoto Protocol commitment period begins in 2008, and it was widely
expected when the Protocol was negotiated that by that time, next steps for the post-
2012 period would be either decided or under active negotiation. However, the
challenge remains to find agreement on the nature of commitments, if any, that
would be acceptable to major players — including Kyoto Protocol parties with
existing obligations, developing countries that are major emitters, and the United
States, whose role is regarded as critical by all potential participants in the post-2012
period. These issues will continue to be considered at COP-13/MOP-3 in early
December 2007, to be held in Bali, Indonesia.