On a cold December day in Japan 25 years ago, history was made when the world’s first internationally binding climate agreement was adopted. The Kyoto Protocol saw 37 industrialized countries commit to reduce their greenhouse gas emissions.

What is the Kyoto Protocol?

The Kyoto Protocol, is an international treaty among industrialized nations that set mandatory limits on greenhouse gas emissions. Entering into force in 2005 and ratified by 192 countries, it was set up to ensure that developed nations took the lead in reducing emissions. “The Kyoto Protocol was the first multilateral agreement under which a number of Parties committed to limiting their greenhouse gas emissions (GHGs),” says James Grabert, Director of the Mitigation division at UNFCCC. “The Kyoto Protocol set obligations for achieving these quantified objectives and for reporting on emissions from the key types of GHGs. As such, the Kyoto Protocol largely drove the first large-scale efforts to curb GHG emissions,” he adds.

The Kyoto Protocol introduced three mechanisms in order to achieve its goals: the Clean Development Mechanism (CDM), Joint Implementation (JI), and Emissions Trading (ET).

Clean Development Mechanism

The CDM allows countries with commitments under the Kyoto Protocol to invest in emission-reduction projects in developing countries. These projects can involve, for example, a rural electrification project using solar panels or the installation of more energy-efficient boilers.

The CDM seeks to foster sustainable development in developing countries and reduce their carbon footprints as well enabling industrialized nations to achieve their emissions reduction commitments under the Kyoto Protocol.

Such projects can generate and earn carbon credits (also knowns as CERs), each equivalent to one cubic tonne of CO2 (roughly the equivalent of a one-way flight from Oslo to Bangkok). These units can be counted towards meeting Kyoto targets. The CDM is a key climate action tool, Grabert says, because it “is an explicit recognition that we all share the same atmosphere.” The CDM is a prime example of how climate targets can be achieved through international cooperation. “With 8,063 projects and 361 programmes registered, the CDM is a success and has led to tremendous investments in emission reduction projects in developing countries,” Grabert adds.

Even if industrialized Parties outsource some of their emission reductions to other countries (which is why such mechanisms are also known as “flexible mechanisms”), the CDM stimulates crucial sustainable development co-benefits as well as local emission reductions: many developing countries do not have the resources necessary to begin an economy-wide transition towards a low emissions future. 

Joint Implementation

This mechanism allows a country with a Kyoto Protocol emission reduction target to invest in a project to reduce emissions in any other country with a commitment (as opposed to a developing country). According to Grabert, Joint Implementation, “pioneered the possibility of two countries with commitments to limiting their GHG emissions to work cooperatively for achieving their objectives. The Joint Implementation demonstrated the potential for such activities in a multilateral framework.”

Emissions Trading

Each signatory to the Kyoto Protocol received a quota for the amount of carbon they can emit. Some countries managed to reduce their emissions to the point where they had no need for all the carbon units they had been given. On the other hand, other countries were not as successful and needed to buy carbon credits in order to meet their objectives.

The Emissions Trading scheme under the Kyoto Protocol set up a platform where carbon units, or units generated by projects registered under the JI or the CDM, or from removals through forestry activities, can be exchanged, i.e. sold and purchased, according to a country’s needs. The scheme made carbon a commodity and created a carbon market.

The International Emission Trading set up in the Kyoto Protocol has not been widely used however, Grabert says. “Instead, Parties to the Kyoto Protocol have focused on the use of other instruments such as the CDM and the JI. A potential explanation could be that some countries also achieved or overachieved their objectives due to changes in domestic factors. But emission trading as a concept has been very successful within specific jurisdictions at the domestic level.”

What’s the Article 6.4 mechanism?

While the flexible mechanisms (CDM and JI) were created to enable the achievement of the Kyoto Protocol targets, the Article 6.4 mechanism (named as it was established by Article 6, paragraph 4, of the 2015 Paris Agreement) seeks to assist countries in achieving the implementation of their national climate plans (known as their Nationally Determined Contributions or NDCs) under the Paris Agreement. The Paris Agreement provides a frame in which all Parties have taken commitments to act on their levels of GHG emissions. “Article 6.4 is usable by all Parties, in this new context, and does not distinguish between developed and developing countries,” Grabert says.

The Article 6.4 mechanism is also designed to incentivize the private sector to implement mitigation activities across the world, in multiple sectors and technologies, such as energy efficiency and transport.

Consequently, carbon credits emerging from this new mechanism will be able to be transferred internationally and used in other countries, by any other international mitigation initiative (such as by the International Civil Aviation Organization) or for social and corporate responsibilities.

The mechanism strives to increase inclusivity by encompassing more beneficiaries, more possible uses and more markets than any other mechanism, with the ultimate goal of contributing to the full implementation of the Paris Agreement.

When will Article 6.4 start operating?

The mechanism was established in the Paris Agreement in 2015, and its rules were agreed at the UN Climate Change Conference COP26 in Glasgow last year. The entity supervising the mechanism, the Supervisory Body, is working to get it up and running as soon as possible with the support of the UN Climate Change secretariat. “The need and use for this new tool will largely be driven by the level of ambition of Parties and non-State actors as well as the eagerness to cooperate on mitigation action under the multilateral process of the Paris Agreement,” Grabert says. The more ambitious climate targets are, the more such instruments of flexibility have a role to play.

But as the Article 6.4 mechanism operates in complex environment, capacity building will be key to ensuring broad participation across countries. Another sign of success will be the participation of a broad range of actors from the private sector and civil society. Designed to be as inclusive as possible, of the mechanism’s success will be determined by how often it is used to meet the goals of the Paris Agreement.

Will the Kyoto Mechanisms still be operational?

They will continue to function, as the decision taken in Glasgow has established a timeframe to transition to Article 6.4, which should be completed by 2025. The CMP (the authority to which the CDM Executive Board answers to) still has to decide on a series of timelines relating to the carbon credits generated under the CDM.

There are multiple lessons to be learned from the Kyoto Protocol Mechanisms, Grabert says. “When the right incentives exist, the private sector is very efficient at identifying and mobilizing the mitigation potential,” he says. “But another lesson is undoubtedly that capacity building is often needed to ensure a wide and balanced participation of all stakeholders and all countries in the mechanism. These lessons can be carried forward to benefit the operationalization of the mechanism under Article 6.4.”