Climate Change

Greenhouse Gases (GHGs) such as water vapour, Carbon dioxide, Methane, and Nitrous oxide are responsible for maintaining the earth's temperature, allowing life to exist. They trap heat and keep the planet warm. If the GHGs did not exist, the planet's temperature would drop to minus 18 degrees C.

Due to increasing human population and economic/industrial development, the concentration of greenhouse gases have been increasing, and it is expected that the average global temperature will rise by about 2 degrees C by 2100. Rising temperatures would cause the global climate to change, affecting our eco-system in various ways such as rising sea levels, change of precipitation pattern, floods and droughts.

An Intergovernmental Panel on Climate Change was created by the World Meteorological Organization and the United Nations Environment Programme in 1988. This panel issued a first assessment report in 1990 stating that global warming was real and urged necessary action. Further to this, the international community in 1992 signed the United Nations Framework Convention on Climate Change (UNFCCC) in order to stabilize greenhouse gas concentrations in the atmosphere.

Kyoto Protocol

At the third international conference held by world leaders in 1997, the Kyoto Protocol was adopted. It set binding targets for industrialized states, designated as "Annex I countries". The protocol warranted that countries reduce GHG emissions by at least 5% from their 1990 levels by 2012. The Kyoto Protocol officially entered into force on February 16, 2005 with over 150 nations' ratification.

Six greenhouse gases specified to lower the overall emissions under the Kyoto Protocol are Carbon dioxide (CO₂), Methane (CH₄), Nitrous oxide (N₂O), Sulfur hexafluoride (SF₆), Hydrofluorocarbons (HFCs) and Perfluorocarbons (PFCs). Each of these gases has a different duration in the atmosphere and a different long-wave radiation absorption strength, which creates different global warming potentials. For instance, Methane is 21 times more powerful a greenhouse gas than Carbon dioxide. Thus, 1 ton of CH₄ reduction is equivalent to 21 tons of CO₂.

It is considered that achieving the Kyoto Protocol target by themselves is technically and financially difficult for many industrialized nations. For instance, the GHG emission in Japan has increased by 8% since 1990. Since Japan's reduction target is 6%, its actual cut requirement will be 14%! The task is more challenging because the energy efficiency is already high and the abatement cost is more expensive in industrialized countries. In consideration of this heavy burden for Annex I countries, the Kyoto Protocol has introduced three flexible mechanisms, which are often referred to as "Kyoto Mechanisms", that enable industrialized countries to reduce the emissions in other countries (known as "Non- Annex I countries") and to buy or sell the emissions from/to other countries.

There are three programs in Kyoto Mechanism:

Clean Development Mechanism

Clean Development Mechanism allows industrialized countries (Annex I Countries - parties to the Kyoto Protocol), to implement emission reduction project activities in developing countries in exchange for certified emission reductions (CERs). For example, if a Japanese company earned CERs by investing in a wind power plant project in China, the credit will be allocated to the Japanese company. The company can sell this credit to the Japanese government or other industrialized countries.

Joint Implementation

The concept of Joint Implementation (JI) is similar to CDM. The differences are that JI projects are implemented between industrialized countries (Annex I Countries), and the reduction amount is counted as Emission Reduction Units (ERUs).

Emission Trading

Annex I parties to the Kyoto Protocol have the right to emit GHGs below their target level (some percentage below the 1990 level) in the first commitment period between 2008 and 2012. Emission Trading allows industrialized countries to purchase units, such as CERs and ERUs, from other industrialized countries and use them towards their emission reduction targets. Only Annex I Parties to the Kyoto Protocol may participate in emission trading.

CDM is a new business opportunity in developing countries. CDM aims to help developing countries achieve sustainable development and contribute to GHG reduction. This will not only provide climate-friendly technologies, but also technical transfer and job creation in those countries. A 2% levy on CDM projects will be utilized to support developing countries in their efforts to cope with the impacts of climate change.

In order for CDM/JI projects to be qualified, the proposed project activity must go through the validation and verification process and meet certain requirements set by UNFCCC. These processes must be validated and verified/certified by a third party organization - a Designated Operation Entity (DOE).

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