The Kyoto loopholes

Among the most serious defects of the Kyoto Protocol was the provision for ‘flexible mechanisms’. Simon Retallack explains why such mechanisms could jettison the real objectives of the Protocol.

THE negotiations at The Hague foundered over what rules to adopt for a series of mechanisms designed to provide countries with ‘flexibility’ in achieving emission reductions. These ‘flexible mechanisms’ - emissions trading, Joint Implementation, the Clean Development Mechanism and the use of carbon sinks - were essential to ensure and maintain the participation in the Kyoto negotiations of the United States (the largest single emitter of greenhouse gases) as well as of Canada, Japan, Australia and New Zealand.

These measures add up to a global market in carbon emissions and have subtly changed the attitudes of some of the participants in the climate change debate, especially those in business. Perhaps the single most lauded feature of the flexible mechanisms is their ability to provide overall cost savings to the developed countries that use them. However, they contain many potential drawbacks, and the governments most supportive of them have lobbied for the laxest possible operating rules, which, were they to be adopted, many parties fear would place in doubt the environmental integrity of the Kyoto Protocol.

Joint Implementation and the Clean Development Mechanism

Joint Implementation (JI) and the Clean Development Mechanism (CDM) are intended to allow credit to be claimed in one country for measures implemented elsewhere. This was proposed in the spirit of economic efficiency: if it was more ‘cost-effective’ to invest in CO2 reduction abroad, then why not address the problem in those countries first?

Joint Implementation would cover activities between developed countries only; that is where both parties are required to make emissions reductions. JI projects must result in savings that are ‘additional to any that would otherwise occur’ and JI credits will be ‘supplemental to domestic actions.’ However, the body and means of deciding what is or is not ‘supplemental’ or ‘additional’ was not defined in the Kyoto Protocol.

The Clean Development Mechanism is a form of joint implementation that allows developed countries to institute projects in countries (mostly in the industrialising world) without legally binding emission obligations, both to accelerate sustainable development in those countries, and also to be credited towards ‘part’ of emissions reductions in the industrialised country financing a project. Like JI, the projects and reductions must be ‘additional’ to what would have been achieved otherwise. Also like JI, the details of how this is to be determined have not yet been decided. The CDM is intended to be ‘certified’ on an individual project basis by as yet undefined ‘operating entities.’

One of the greatest sources of conflict during the negotiations to decide the rules of these two mechanisms was what type of projects industrialised countries could claim credits for. While the governments of the EU argued that only projects from a ‘clean list’ of activities should be permissible, the US and its allies insisted that everything, from nuclear power, ‘clean coal’ and large hydroelectric dams to so-called ‘sink’ activities (see below), should be allowed.

Emissions trading 

Emissions trading may be described as another ‘low-pain option’ for those industrialised countries unable or unwilling to commit to carbon reductions at home in the short term. The complexities of such a regime are undeniable. What percentage of a country’s reductions may be achieved by trading, which greenhouse gases can be traded, what body regulates and verifies the trading regime - these and many other variables were not resolved in Kyoto and have been the subject of vigorous and unresolved debate ever since.

As currently defined, the emissions trading regime will allow for notional pollution reductions, where country one can ‘buy’ the ‘unused’ emissions of country two. But in the period up to 2012, ‘hot-air’ trading could actually lead to an increase in global emissions.

Under the Kyoto Protocol, Russia and the Ukraine secured the right to stabilise their emissions at 1990 levels by 2012. Since their economies collapsed after 1990, Russia and the Ukraine’s emissions are currently far below 1990 levels. On paper, these two countries will thus be allowed to increase their emissions by 50% and 120% respectively by 2012. However, their industries will not conceivably be able to grow this fast. Instead, they will be able to sell much of that entitlement to other countries. The United States has already made clear its intention to purchase this ‘hot air’ in order to achieve a substantial proportion of its reduction requirement. 

If the Russia-US deal goes ahead, emissions that were avoided are simply going to be traded back into the atmosphere, with no actual emission reduction taking place. It could even enable the United States to turn the notional 7% cut in emissions that it has signed up to, into a real increase of up to 10%. The selling countries would not even have to invest the money they receive from the sale into developing renewable or cleaner sources of energy and thereby avoid future greenhouse gas emissions. For these reasons, the EU has argued that industrialised countries should be allowed to meet no more than 50% of their emissions reduction targets through trading, a proposition rejected outright by the US.


Perhaps the greatest source of concern with the Kyoto Protocol revolves around the issue of ‘sinks’ - those natural processes that absorb more carbon dioxide than they give out. Under the Kyoto Protocol’s ‘flexibility’ rules, every tonne of carbon dioxide said to be absorbed from the atmosphere by sinks - in forestry and agricultural activities - permits a country to emit an additional tonne of carbon dioxide from burning fossil fuels.

As with the other flexible mechanisms, the motive for the inclusion of sinks in the Protocol is clear. Politicians fear the corporate and public reaction to cutting back on fossil fuel consumption; far easier, then, to use their countries’ forestry and agricultural sinks to partly offset their obligations to reduce greenhouse gas emissions.

Problems abound

Aside from the fact that the sinks provision allows countries to avoid having to reduce emissions at their source, countless other problems abound with this approach, even when it applies to genuine attempts to plant new forests or use new agricultural practices designed to enhance carbon retention in soil.

Firstly, as biologists point out, there is not yet enough data on natural carbon cycling to establish full accounting and verification procedures for carbon sinks. The science simply does not exist to enable prediction of exactly how much carbon is being absorbed by a country’s sinks and whether the carbon moving into forests or soils will actually stay there. The procedures would be exceedingly complex, not only because of uncertain science but also because of an accounting maze which would complicate monitoring and enforcement, and encourage governments to fiddle with the figures.

Relying on sinks to soak up CO2 over an extended period of time is also particularly unwise given that in a warmer world forests are likely to become even more vulnerable to fire and to rot, and thus become net sources of carbon dioxide, not sinks for it. Indeed, according to the latest models of the UK’s Meteorological Office, after 2050, decreases in rainfall and increases in temperature will result in vegetation die-back and change, primarily in Amazonia, Europe and North America, transforming the terrestrial land surface into a source of carbon, releasing approximately two billion tonnes of carbon per year into the atmosphere.

If that were not of enough concern, in order to be able to claim that yet more of their emissions have been cut without actually having to reduce them at their source, the US and its allies have been insisting that ‘additional’ sink activities of highly dubious merit be included too. The US has proposed that these should extend to forest management practices that already take place and would continue to do so regardless of the Kyoto Protocol, thus providing no additional benefits in terms of emission reductions.

If only the second of these proposals were to be adopted, the US would be able to claim that at least half of the total amount of emissions it is obliged to cut by 2012 had been absorbed by domestic forestry activities without its having to do anything new, let alone make any reductions in industrial emissions at their source.

In an equally if not more damaging move, the US has been demanding that the same rules apply to the Clean Development Mechanism. If sink activities are permitted in the CDM, such a vast supply of credits would be available that there would be virtually no incentive for domestic emission reductions whatsoever. A horde of other problems may also be expected on the ground. Many of the countries that would presumably be invited to host such projects have weak legal systems, weak forest management agencies, and large corporations which burn forests because they know they can get away with it. Monitoring and the critically important participation of local people could often be extremely hard to ensure.

Perverse incentives

Furthermore, incredibly, the inclusion of sinks in the CDM will have the potential to create perverse incentives to cut down old growth forests and jeopardise other natural ecosystems, depending on how the activities industrialised countries will claim credits for are defined.

Take ‘reforestation’. The Intergovernmental Panel on Climate Change (IPCC) defines this as planting on lands that ‘historically, previously contained forests but which have been converted to some other use’. But this could refer to very recent history. The conversion could take place now, as long as replanting follows before or during the period in which countries have to make emission reductions. Countries could thus earn credits by logging an area, leaving it as grazing land for a few years and then installing a pulp plantation on it. As the UN climate convention secretariat itself has pointed out, ‘countries would be able to convert natural forests to other land uses, begin a plantation scheme, and then declare those lands as ‘reforested’... in this case, reforestation would lead to net emissions rather than sinks.’ The replacement of native, natural forests with tree plantations, often chemically dependent, non-native monocultures, is already a factor in global forest decline. Consequently, it could be argued that the result here is not reforestation but deforestation.

Plantation forestry

Nor is the extension of plantation forestry necessarily good news on the climate front. There is a common misperception that rapidly growing plantations are better carbon sinks than the apparently more static natural forests. In fact, the total amount of carbon stored is generally greater in the natural forest, with its larger trees and far richer soils. In temperate forests, as much as two-thirds of the carbon is stored in the soil and forest debris, not the trees.

All in all, it is clear that sink accounting could become a major loophole which admits vast quantities of fossil carbon into the skies. In a sense, the Protocol has got the problem exactly reversed: instead of looking to forests for a way to avoid facing up to our fossil fuel addiction, we ought to deal with the addiction in a way that avoids endangering forests through climatic disruption. It is clearly incumbent upon every political leader to do their utmost to stem the onslaught of deforestation which currently accounts for one-fifth of humanity’s annual emissions of carbon dioxide. But managing forestry to mitigate climate change will neither safeguard the world’s ancient forests nor prevent dangerous climate change. Managing our fossil fuel addiction, however, will.                      

Simon Retallack is the managing editor of The Ecologist Reports (UK).