To create incentives to find the most efficient ways of reducing greenhouse gases, the Kyoto Protocol envisions an international system for trading emissions credits, which would permit nations with excess credits to sell them to the highest bidder. By creating a monetary value for emissions credits—in effect making them a commodity—the idea is that market forces will encourage corporations and governments to switch to cleaner fuels and industrial processes, rather than enacting punitive and burdensome regulations, that would apply uniformly and unfairly to all sectors of the economy.

As we have seen, countries like Russia and the Ukraine will have an excess of credits for sale. This is not because they have purposefully reduced consumption of fossil fuels. Rather, since the breakup of the Soviet Union, the economies of these countries have gone into a deep recession, and their gross domestic products have declined. In short: fewer factories are operating and less fossil fuel is being consumed.

The United States favours an unrestricted trading system, and American officials have suggested that the U.S. wants to have the option of meeting most of its Kyoto commitment by buying credits from Russia and the Ukraine, rather than actually reducing greenhouse gas emissions domestically. The Europeans favour a cap on trading, which would force industrialized countries to commit to a certain percentage of domestic emissions reductions. This was one of the unresolved issues on the table at the Buenos Aires negotiations.

The Kyoto Protocol offers industrial nations another way to earn emissions credits by funding projects in developing countries which meet two criteria: they must measurably reduce greenhouse gas emissions and they must promote sustainable development. Known as the Clean Development Mechanism (CDM), this option—like many other aspects of the accord—is so far poorly defined and the subject of much debate. From a northern perspective, the CDM is an incentive to industrialized nations to export the best of their clean energy technology. It would stimulate R&D, create jobs and technology transfer and allow industrialized countries to gain emissions credits more cheaply than if they had to invest in more efficient plants and machinery at home. This has occurred because northern countries are relatively energy efficient even though their lifestyles involve high rates of consumption. To make an efficiency gain of 10 percent in an industrialized country will be much more costly than a 10 percent gain in a developing country. For example, it is cheaper to build a new gas-fired co-generation plant in Tanzania than to upgrade an already efficient plant in New York, where land and labour are much more expensive.

The reaction of policy-makers in developing countries to the CDM is decidedly mixed. The strongest criticism comes from India's Centre for Science and Environment, which calls it a way of allowing industrialized countries to meet their emissions reduction targets "on the cheap." The Centre raises three main objections:

1. In order to help the North meet its commitments, developing countries will be selling off cheaper emissions control options, leaving future generations straddled with higher cost options.
2. Definition of eligible projects and products will be difficult. Will a more energy efficient model of car be eligible for credit, even though it is for sale in the North, and was not specifically designed for developing countries?
3. There is a risk that corporations will use the CDM as an opportunity to test experimental technologies.

In its assessment, the ENDA-TM Energy Programme in Dakar, Senegal says the CDM offers the advantage of access to new technologies for African countries. However, CDM projects must be consistent with sustainable development priorities, and the definition should be broadened to include South-South exchanges, so that African countries can benefit from appropriate technologies developed by India and China. The ENDA-TM Energy Programme also has concerns about how the eligibility of projects will be determined. [linking climate change projects to sustainable development]

Word Watch
	appropriate technology n. a flexible and participatory approach to developing economically viable, regionally applicable and sustainable technology More in Word Watch Glossary
In Depth
	Chatterjee, Kalipada, ed. Activities implemented jointly to mitigate climate change: developing countries perspective. New Delhi: Development Alternatives, 1997. 450 p. More in Hot Topic Bibliography
Virtual Ideas
	Weathervane - A Digital Forum on Climate Change Policy More in Hot Topic Bibliography

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