The flexibility mechanisms included in the Kyoto Protocol are key provisions on which
the economic viability of the treaty rests. They are essential for business and industry to
make progress in reducing greenhouse gas emissions. It is important that the Parties work
to establish the programmatic details of and to build upon the flexibility provisions
agreed to in Kyoto.
Article 17 of the Kyoto Protocol makes explicit provisions for emissions trading between
Annex I (developed) countries. By allowing greenhouse gas emissions reductions to take
place wherever they are most easily and efficiently achieved, emissions trading is at the
heart of our ability to achieve reductions in a cost-effective manner. Recent studies have
shown that emissions trading can reduce costs by 40-80%.
The International Climate Change Partnership (ICCP), a coalition of companies and
industries around the world committed to responsible participation in the climate change
policy process, supports the following principles with regard to an emissions trading
Emissions trading programs should be voluntary and encourage maximum participation.
No quantitative limits on trading should be imposed on Parties or entities. Verified
reductions from all sources and sinks should be eligible for trading.
Units of trade should be clearly denominated, normalized, freely transferable, and should
remain with the earning entity for use at their discretion.
Credits earned prior to the first budget period through CDM, JI, or other early action
projects should be eligible for trading.
Emissions trading should be allowed at the entity level (company, NGO, etc.), while
recognizing the responsibility of Parties to manage their budgets.
The emissions trading program should be sufficiently simple to encourage active
participation by industry. Artificial restrictions and bureaucratic impediments should be
avoided to ensure that transaction, compliance, and administrative costs are minimized.
Verification and accounting procedures should be credible, transparent, and streamlined.
Rules should apply to all Parties while maintaining enough flexibility to accommodate
changes to the system in the future.
Each trade will have a differing degree of risk based on numerous complex factors,
therefore, liability should be negotiated between buyers and the sellers. Exclusive
reliance on buyer liability should be rejected.
Voluntary, domestic emissions trading programs should be encouraged to begin prior to
the first budget period.