At COP 7, decision 14/CP.7 was adopted on the impact of single projects on emissions in the commitment period. According to this decision, any Annex I Party, which accounts for less than 0.05 per cent of the total Annex I Parties emissions in 1990, can exclude from its national total emissions during the commitment period, the emissions from single projects provided that renewable energy is used, resulting in a reduction in greenhouse gas emissions per unit of production, and best environmental practice is used to minimize process emissions. Decision 14/CP.7 required any Party wishing to avail itself of these provisions to provide a notification to this effect before COP 8. At COP 8 (New Delhi, October/November 2002) it was noted that two notifications had been received: one from Iceland and one from Monaco.

The problems associated with the impact of single projects on emissions in the commitment period were first raised by the delegation of Iceland during the negotiations on the Kyoto Protocol. Iceland expressed concern that, for Parties with very low emissions baselines, a single project (e.g. construction of an aluminium smelter) could lead to a disproportionate percentage increase in emissions. Iceland's concerns were reflected through paragraph 5(d) of decision 1/CP.3 adopted at COP 3 (Kyoto, December 1997), which called for this issue to be further considered at COP 4 (Buenos Aires, November 1998).

At COP 4, Iceland proposed a draft decision on the impact of single projects. According to this proposal, single projects that have a significant proportional impact on emissions in the commitment period should be reported separately, and not included in national totals, to the extent that they would cause a Party to exceed its assigned amount. The proposal explicitly limited this provision to:

• Parties that account for less than 0.05% of total Annex I emissions in 1990;
• Single projects involving industrial processes that account for more than 5% of the total greenhouse gas emissions of a Party in 1990;
• Single projects where renewable energy is used, resulting in a reduction in greenhouse gas emissions per unit of production; and
• Single projects where best environmental practice is used to minimize process emissions.

A number of Parties requested additional information and clarifications on Iceland's proposal. These requests, and responses provided by Iceland, have been compiled in miscellaneous documents (see below).

Discussions on the impact of single projects took place during COP 4 and at subsequent SBSTA sessions. After informal consultations held at SBSTA 13 part I (Lyon, September 2000), Parties agreed to consider the issue further at SBSTA 13 part II (meeting together with COP 6 in The Hague, November 2000).

Following discussions at SBSTA 13 part II, Parties forwarded a draft decision to COP 6 for further consideration, based on a revised proposal presented by Iceland. This revised draft decision stipulated that the total industrial process CO₂ emissions that a Party may exempt from its national totals under the proposed provision shall not exceed a cap of 1.6 million tonnes annually on average over the first commitment period. Another revision was made following consultations during COP 6, further specifying that the exempt emissions may not be transferred or acquired through emissions trading or "joint implementation" projects.

However, consensus could not be reached on the revised draft decision and, together with draft texts on other issues, it was referred to a resumed session of COP 6. At COP 6 part II (Bonn, July 2000), Parties completed their work on this issue, reaching agreement on the revised draft decision, including the proposed cap of 1.6 million tonnes and the prohibition on the use of exempt emissions to participate in emissions trading or "joint implementation". The completed decision was forwarded to COP 7 (Marrakesh, October/November 2001) where it was adopted (decision 14/CP.7).