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Greenhouse
gases mix uniformly in the earth's atmosphere. Unlike sulphur
dioxide or low level ozone, carbon dioxide and other greenhouse
gases have the same impact on climate everywhere in the world.
It does not matter, therefore, where one begins to reduce net
emissions.
This fact provides the economic justification for international
cooperation on climate change projects and project-based emissions
trading. International cooperation makes economic sense because
emissions reductions in developing countries generally costs
less than in industrialized countries. The difference between
marginal reduction cost for the investor (industrialized country)
and the host (developing country) is the 'surplus'.
The host country and the investor country can share the surplus
so that both benefit - the investor by reducing emissions more
cost effectively than could be done in the investor's home country
and the host by receiving additional finance that allows it
to implement a greenhouse gas reduction project that would otherwise
not be viable. |
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The
industrialised country starts by keeping a regularly updated
inventory of its emissions.
A national target for reduction of these emissions is set within
the Kyoto Protocol. The industrialised country may then chose
to allocate its national target across a number of domestic
emitters.
The domestic emitter can then meet these targets through one
of three methods:
Mitigation activities within the country;
Through the Joint Implementation Mechanism (another carbon trading
mechanism within the Kyoto Protcol); and
Through the CDM - where the emitter can invest in a project
in a developing country (thus gaining Certified Emissions Credits
for themselves) or buy CERs from someone who has invested in
such a project.
Requirements on the host country are fairly straightforward.
For a host country to be eligible to participate in the CDM,
it must:
Ratify the Kyoto Protocol; and
Designate a national authority to provide official host country
approval of a project.
With the Designated National Authority (DNA)
in place, the Clean Development Mechanism (CDM)
can start to operate in a host country. It is a project-based
mechanism and is driven by market forces - relying on potential
investors finding suitable investment opportunities (projects)
in host countries. The DNA of a host country will be able to
assist the matching of investors with suitable CDM project opportunities
developed within the host country. |
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