The impact of the Kyoto Protocol

The environmental reform of the last decade has stimulated the creation of a new tradable emissions scheme. Carbon credits as a term refers to the specific allocated amount of environmental emissions as a unit of measure. To simplify the concept, a carbon credit is approximately one ton of carbon emissions. Ratification of such a unit of measurement has been a hot topic of debate in recent years, with many opposing views on how to measure the level of carbon emissions.

Policies for managing carbon credits and greenhouse gas emissions were developed in the 1990s and formalized under the Kyoto Protocol. Specific policy has been the key driver behind the environmental debate with the United States and Australia recently highlighting the importance of global warming. Initially, the Kyoto protocol was ratified by the European Union with the implementation of several important policies. Some of the key details of this policy include:

• Market for tradable carbon credits regulated by the UNFCCC
• National registration and Categorization of companies based on emission levels

Revolutionary and forward thinking in its implementation, the European Union established the European Trade Scheme which focused on providing a liquid and transparent market for businesses and companies in the EU. In 2005, the EU reported that all nations within the zone would be subject to the strict gas emission standards set out in the Kyoto protocol. However, two nations during this period did not ratify the agreement. Australia and the US highlighted to the world community that their non-compliance was a consequence of their resource- and industry-centric economies. They argued that the Kyoto protocol would unfairly disadvantage nations that focused on certain high-emissions industries like mining. In 2008, the Labor party election in Australia led to the ratification of the Kyoto agreement and the publication of the Garnot report outlining a possible emissions trading scheme.

The key issue that arose from the Kyoto Protocol was the accessibility of a trading scheme and the complexity of unlocking emissions credits. Three proposed strategies were implemented and fully adopted by 170 nations in 2008. These included:

1. Emissions trading exchanges: allocation of amounts and levels of credit for companies to trade. With the implementation of climate exchange in Europe and Chicago, Australia is now looking to design a similar system.
2. Clean Development Initiative: This proposed strategy led to increased awareness of greenhouse gas emissions in emerging or underdeveloped nations. Under the Kyoto protocol, developed nations seeking to reduce or offset their high levels of emissions could support third world initiatives that would reduce overall gas levels. This became quite popular with the establishment of many socially responsible projects.
3. Cooperation Agreements – Development of joint initiatives between developed countries.

The Kyoto Protocol was an initiative in the 1990s to effectively manage greenhouse gas emissions. Its relevance today and the effective change of global government policy has stimulated the development of a new sector and industry. Although the recent global financial crisis has put the environmental debate on the back burner, the global community still sees the importance and need for environmental economic standards.