Publication Name

THE CYCLE – OFFSET

KICK THE HABIT

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own country but to account for their national emission reduction targets.

Offsets offered and purchased under this framework are part of the “com-

pliance market”. For all offsets created under the Kyoto mechanisms it is

independently verified that the reductions have actually taken place and

registered in the Clean Development Mechanism (CDM) registry which

has the advantage of transaction credibility, protection against fraud and

errors, and simplified facilitation of transactions based on established

standards and procedures.

In 1997 the Kyoto Protocol established legally-binding targets for green-

house gas reductions by the so-called Annex I countries (predominantly

developed countries and countries with economies in transition). The Pro-

tocol established what are called Flexible Mechanisms to allow these coun-

tries to meet their targets by trading carbon credits or emission reduction

units – essentially this means buying the right to emit from those with

emission rights to spare. Emission reductions can be achieved through the

‘Clean Development Mechanism’ (CDM) and ‘Joint Implementation’ (JI).

The compliance market is the product of these Flexible Mechanisms. Inter-

national ‘Emissions Trading’ is an option under which most Annex I coun-

tries can supplement domestic reductions by trading spare GHG emission

quotas with each other.

Clean Development Mechanism (CDM)

The CDM is expected to have delivered close to three thousand million

tonnes of CO

e in offsets by 2012 which makes it the framework generat-

ing the largest number of emission reductions in the world. It allows Annex

I countries to invest in projects that reduce emissions in developing coun-

tries as an alternative to more expensive emission reductions in their own

countries to meet their own reduction targets. The projects generate emis-

sions credits called Certified Emissions Reductions (CERs), which can then

be traded. Anyone, not only governments, can buy the CDM certificates

and use them to meet their obligations under the Kyoto Protocol. For the

countries where the projects take place, the investment results in various

benefits such as technology transfer and economic stimulus. To date there

are almost 1 000 projects registered under the CDM mechanism. In order

to qualify for the CDM, one must demonstrate that the activities result in

additional emissions reductions.