The Kyoto Protocol was adopted at the third Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC) (COP 3) in Kyoto, Japan on Dec. 11, 1997. The Protocol shares the objective and institutions of the UNFCCC. The major distinction between the two, however, is that while the Convention encouraged industrialized countries to stabilize green house gas (GHG) emissions, the Protocol commits them to do so. The detailed rules for its implementation were adopted at COP 7 in Marrakesh in 2001, and are called the"Marrakesh Accords."

The Protocol places a heavier burden on developed nations under the principle of "common but differentiated responsibilities." The Kyoto Protocol entered into force on Feb. 16, 2005. 176 Parties have ratified the treaty to date.

Under the Protocol, 36 industrialized countries and the European community have committed to reducing their emissions by an average of 5 percent against 1990 levels over the five-year period 2008-2012.

For this group of countries, reductions of 11 percent are projected for the first Kyoto commitment period from 2008 to 2012, provided policies and measures planned by these countries are put in place. These countries will also have to make use of the Protocol's "flexible mechanisms" in order to reach their collective emission reduction goal.

Flexibility in meeting targets:

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 tons (of CO2 equivalent emissions).

Industrialized countries must first and foremost take domestic action against climate change, but the Protocol allows them a certain degree of flexibility in meeting their emission reduction commitments through three innovative market-based mechanisms.

The Kyoto Mechanisms:

The three Kyoto mechanisms are: Emissions Trading known as "the carbon market" the Clean Development Mechanism (CDM) and Joint Implementation (JI). The carbon market spawned by these mechanisms is a key tool in reducing emissions worldwide. It was worth 30 billion U.S. dollars in 2006 and is set to increase.

JI and CDM are the two project-based mechanisms which feed the carbon market. JI enables industrialized countries to carry out joint implementation projects with other developed countries (usually countries with economies in transition), while the CDM involves investment in sustainable development projects that reduce emissions in developing countries.

Since the beginning of 2006, the estimated potential of emission reductions to be delivered by the CDM pipeline has grown fourfold to more than 2.2 billion tons of CO2 equivalent - approximately the combined emissions of Australia, Germany and the United Kingdom. Overall, more than 860 CDM projects have been registered to-date, with around 2,800 more in the project pipeline.

Monitoring targets under the Protocol:

Under the Protocol, countries' actual emissions have to be monitored and precise records have to be kept of the trades carried out. Parties must keep a national registry to track and record transactions under the mechanisms. The secretariat keeps and independent transaction log to verify that transactions are consistent with the rules of the Protocol, and expert review teams have been set up to ensure compliance.

Adaptation:

The Kyoto Protocol, like the Convention, is also designed to assist countries in adapting to the inevitable effects of climate change and facilitates the development of techniques that can help increase resilience to climate change impacts.

The Adaptation Fund was established to finance concrete adaptation projects and programs in developing countries that are Parties to the Kyoto Protocol. The Fund is to be financed with a share of proceeds from CDM project activities and receive funds from other sources. The share of proceeds from CDM project activities amounts to 2 percent of CERs issued for each project.

The road ahead:

The Kyoto Protocol is generally seen as an important step towards a truly global emission reduction regime that will stabilize greenhouse gas concentrations. As a result of the Protocol, governments have already put, and are continuing to put in place legislation and policies to meet their commitments; a carbon market has been created; and more and more businesses are making the investment decisions needed for a climate-friendly future. The Protocol provides much of the essential architecture for any new international agreement or set of agreements on climate change.