Carbon sinks and emissions trading under the Kyoto Protocol: a legal analysis.

The controversy over the issues of carbon sinks and emissions trading nearly aborted the Kyoto Protocol. The lengthy and intense debate over the roles that each are to play under the Protocol and the consequent political compromises has resulted in a complex set of provisions and an arcane nomenclature. The distinction drawn between the use of carbon sinks in developed countries under Joint Implementation and their use in developing countries under the Clean Development Mechanism (CDM) is a particular source of intricacy. It is at least arguable that key elements of the compromises reached at COP-6 and COP-7 in this regard are inconsistent with the terms of the Protocol and are ultra vires the Convention on Climate Change. This is a source of both uncertainty and potential legal challenge. Not only do the recent decisions create needless complexity, they also clearly discriminate against developing nations. Among the recent political compromises is the creation of a third type of non-bankable but tradeable unit with respect to forest management, which is only available to Annex I countries. The result is an anomalous one in which a variety of otherwise equivalent carbon credits can be generated under three different regimes including one, the CDM, that is subject to an elaborate regulatory overlay that discriminates against carbon sequestration by developing countries. For example, complying developed countries can essentially self-certify sequestration projects. In contrast, projects in developing countries must obtain prior approval from a subsidiary body, the CDM Executive Board, mandated to require detailed information and impose substantive and procedural hurdles not required or imposed by its companion body, the Article 6 Supervisory Committee on Joint Implementation Projects. The parallel and related debate over the third 'flexibility' mechanism, emissions trading, compounded the complexity of an already asymmetric and bifurcated system. The new requirements devoted to 'environmental integrity' not only have raised the costs of compliance of developing country projects but also virtually ignore the fundamental principle of sustainable economic growth and development embodied in the Convention and related international agreements. The regulations for carbon sinks now being formulated at Conferences of the Parties will have a significant impact on their use worldwide. Of key importance, in addition to their successful integration of carbon sinks and emissions trading into other international treaties, is the development of practically achievable and objective standards and an efficient and transparent approval process consistent with the terms of the Convention and the Protocol. Most important of all is a rebalancing that restores the primacy of addressing climate change in the context of sustainable economic growth and development.