Kyoto related terminology

Annex 1 countries

The world's industrialised countries plus 'economies in transition' (mostly in Central and Eastern Europe) Only Annex 1 countries have legally binding emissions reduction targets under the Kyoto Protocol.

Annex 1 Not Ratified

USA and Australia

Non Annex 1 countries

Developing countries which have no emissions limits under the Kyoto Protocol.

Annex B countries

Those countries that face mandatory GHG reduction obligations under the Kyoto Protocol. These countries are: EU 15 countries: Bulgaria, Czech Republic, Estonia, Latvia, Lichtenstein, Lithuania, Monaco, Romania, Slovakia, Slovenia, Switzerland. US, Canada, Japan, Hungary, Poland, Croatia, New Zealand, Russian Federation, Ukraine, Norway, Australia, Iceland. Two Annex B countries - the United States and Australia - have not ratified the Kyoto agreement and therefore do not face any emission reduction obligations under Kyoto at this time. The Kyoto Protocol offers three 'flexibility mechanisms' to allow countries to meet its targets.

Annex 1 or Annex B?

In practice, Annex 1 of the Convention and Annex B of the Protocol are used almost interchangeably. However, strictly speaking, it is the Annex 1 countries that can invest in JI/CDM projects as well as host JI projects, and non-Annex 1 countries that can host CDM projects, even though it is the Annex B countries that have the emission reduction obligations under the Protocol. Note that Belarus and Turkey are listed in Annex 1 but not Annex B; and that Croatia, Liechtenstein, Monaco and Slovenia are listed in Annex B but not Annex 1. CDP refers to Annex B countries throughout.

1. Joint Implementation (JI)

Under this method, an Annex I Party may implement a project that reduces emissions (e.g. an energy efficiency scheme) or increases removals by sinks (e.g. a reforestation project) in the territory of another Annex I Party, and count the resulting emission reduction units (ERUs) against its own target.

2. Clean Development Mechanism (CDM)

This method allows Annex 1 countries to make emissions reductions overseas in non-Annex 1 countries and count those reductions towards their own legal commitments. This method results in the issuing of CERs.

3. Emissions Trading

This involves buying and selling of credits, usually measured in tons of CO2, which might originate from the UN CDM system, in the form of CERs, the JI system, as ERUs or the European Trading Scheme as EUAs. All these credits can be bought and sold, so that companies who have too many credits can sell them off and companies who don't have enough can buy them. One of the largest of these emissions trading schemes is:

The European Union Emissions Trading Scheme (EU ETS)

This was launched in January 2005 by the European Commission to help achieve its Kyoto Protocol commitments. This is a cap and trade system which is designed to allow high emitting firms to reduce their emissions at the lowest possible cost. The European Commission puts a cap on each country's emissions and issues them a certain amount of allowances - measured in tons of carbon dioxide and then national governments allocate credits / allowances to firms. Companies who don't have enough allowances to cover their emissions can buy more through the ETS. Companies who have too many can sell them. Allowances can also be brought into the system from outside the EU through UN systems set up under Kyoto (see below)

Certified Emissions Reductions (CERs)

CERs are issued by the Clean Development Mechanism Executive Board once a project has been validated and the emissions reductions themselves have been verified. They can then be used by governments towards reaching their Kyoto targets or by companies to trade in the EU Emissions Trading Scheme. The purchasing company surrenders the CERs to government as part of the company's emissions target.

Emission Reduction Units (ERU)

Emission reductions achieved with JI projects [see below] awarded credits called emission reduction units (ERUs), where one ERU signifies an emission reduction of one tonne of CO2 equivalent.

European Allowances (EUAs)

European Allowances are those greenhouse gas units issued under the EU ETS

National Allocation Plans (NAPs)

NAPs are set annual allocation limits and plans as proposed by member states under the EU ETS.