Emission targets for industrialized country Parties to the Kyoto Protocol are expressed as levels of allowed emissions, or "assigned amounts", over the 2008-2012 commitment period. Such assigned amounts are denominated in tonnes (of CO2 equivalent emissions) known informally as "Kyoto units".
The ability of Parties to add to their holdings of Kyoto units (e.g. through credits for CDM or LULUCF activities) or move units from one country to another (e.g. through emissions trading or JI projects) requires registry systems that can track the location of Kyoto units at all times.
Two types of registry have been implemented:
- Governments of the 38 Annex B Parties have implemented national registries, containing accounts within which units are held in the name of the government or in the name of legal entities authorized by the government to hold and trade units.
- The UNFCCC secretariat, under the authority of the CDM Executive Board, has implemented the CDM registry for issuing CDM credits and distributing them to national registries. Accounts in the CDM registry are held only by CDM project participants, as the registry does not accept emissions trading between accounts.
In addition to recording the holdings of Kyoto units, these registries "settle" emissions trades by delivering units from the accounts of sellers to those of buyers, thus forming the backbone infrastructure for the carbon market.
Each registry operates through a link established with the International Transaction Log (ITL) put in place and administered by the UNFCCC secretariat. The ITL verifies registry transactions, in real time, to ensure they are consistent with rules agreed under the Kyoto Protocol. The ITL requires registries to terminate transactions they propose that are found to infringe upon the Kyoto rules.
In verifying registry transactions, the ITL performs an independent check that unit holdings are being recorded accurately in registries. After the Kyoto commitment period is finished, the end status of the unit holdings for each Annex B Party will be compared with the Party emissions over the commitment period in order to assess whether it has complied with its emission target under the Kyoto Protocol.
EU emissions trading
Domestic or regional emissions trading schemes that use Kyoto units also undertake their settlement through these registry systems. For example, under the second phase of the EU. The EU Emissions Trading System (EU ETS) allowances are specific Kyoto units which have been designated as being valid for trading under the scheme. Transactions in the EU allowances are therefore recorded automatically as transactions under the Kyoto Protocol.
As EU trading legislation sets in place rules over and above those agreed for the Kyoto Protocol, a supplementary transaction log has been implemented by the European Commission. The European Union Transaction Log (EUTL) previously Community Independent Transaction Log, has been in place since the start of the scheme in 2005 and EU registries are now operating with it.
For the start of the Kyoto commitment period in 2008, EU registries are to switch their connections from the EUTL to the ITL. The ITL will conduct 'Kyoto checks' on transactions proposed by both EU and non-EU registries. In the case of transactions involving EU registries, the ITL will forward information to the EUTL so that it can conduct 'supplementary checks' defined under the EU scheme.