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The Kyoto Protocol |
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Kyoto Protocol was reached at Kyoto, Japan in 1997 at a conference of UNFCCC. This protocol demands specific reduction in emissions of greenhouse gases by participant industrial nations within a time period of 2008-2012.
United States was first among industrialized nations to sign this protocol. But in 2001 US pulled out of this protocol instead of ratifying the said agreement. USA claimed that its participation in this protocol would adversely affect its economy. It also criticized the Kyoto protocol for failing to mandate developing nations like Indian and China regarding limitation of their emissions.
Under Kyoto protocol there exist two major trading devices. They are listed below.
- Clean Development Mechanism (CDM)
- Joint Implementation (JI)
Clean development mechanism allows the Kyoto nations to cut down on their emissions via investment in what is known as clean technologies in developing nations. Alternatively they can buy resultant certificates of emission reduction (CERs) from concerned types of projects. Joint implementation (JI) has provision for industrialized developed nations to pursue similar kind of activities in other industrialized nations. 1.1 billion CERs were channeled via EU ETS in year 2006. These were worth $24.3 billion. Each CER was worth one metric ton of carbon dioxide. Big banks, brokerage firms and hedge funds worldwide nowadays possess dedicated carbon departments. Big institutional firms worldwide, primarily dominate trading of carbon credits and their generation along with carbon-associated risk mitigation. However individual investors still have a huge profit earning potential in this sector. Under clean development mechanism initially big investment firms operated in developing nations like India and China. These institutions reaped huge profits from their operations. Prime markets in current carbon reduction projects are listed below.
- Energy Efficiency
- Demand-side management
- Methane Capture
- Fuel Switching
- Carbon Capture
- Power Plant Revamping
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