Industrialized countries must first and foremost take domestic action against climate change, but the Protocol provided a certain degree of flexibility by allowing Annex I countries to achieve their mitigation commitments through three innovative mechanisms. The three Kyoto mechanisms are: Joint Implementation (JI), the Clean Development Mechanism (CDM) and Emissions Trading (ET), included in Articles 6, 12 and 17 respectively.  While Emissions Trading is purely a market-based instrument, JI and CDM are the two project-based mechanisms which feed the carbon market. Although the Protocol laid down basic provisions on the mechanisms, the detailed rules and modalities for the mechanisms to be implemented were subsequently agreed upon by Kyoto Protocol Parties on later stages as part of the Marrakesh Accords. Parties should meet eligibility criteria to be able to take part in all three mechanisms.



Article 6/Joint Implementation

Clean Development Mechanism

Non-Project mechanism

Emission Trading

Parties subject to participation/eligibility criteria

Annex I - Annex I

Non Annex I - Annex I

Annex I - Annex I

Authorized Legal Entities (dependent on party eligibility criteria)




Kyoto Unit


CER, tCER and lCER


Unit Fungibility




Unit Use restrictions

Refrain from Using ERUs from Nuclear facilities

CERs from afforestation and deforestation not to exceed %1 of Party’s assigned amount. Annex I are to refrain from using CERs from nuclear facilities

No restrictions

Unit Carry-over

Yes - 2,5 % of a Party’s assigned amount

Yes - 2,5 % of a Party’s assigned amount

Yes - without restriction

Unit Availability

2008 to 2012

From 2000

2008 to 2012

Coverage of activities

All Kyoto eligible sources and LULUCF activities

All Kyoto eligible sources with priority to small-scale; sinks limited to afforestation/reforestation


Responsible Institutions

Accredited Independent Entities, Article 6 (JI) Supervisory Committee, COP/MOP

Designated Operational Entities (DOEs), Executive Board, COP and COP/MOP

National Registries, Transaction Log, COP/MOP

Administrative support




Administrative Costs

To be borne by participants

To be borne by Project participant and DEOs

No specific provisions


Joint Implementation (JI): Article 6 of the Protocol defines JI as a project-based mechanism implemented by Annex I parties. The mechanism allows Parties with an emission limitation or reduction commitment under the Protocol to implement emission-reduction (or emission removal) projects in other Annex I parties with commitments under the Protocol. JI projects result in the generation of emission reduction units (ERUs) which can be counted towards meeting emissions target of the investing Party. JI projects earn emission reduction units (ERUs), each equivalent to one tonne of CO2. While JI projects can take place between any two Annex I Parties, in practice, this mechanism pertains mostly to projects in Eastern Europe and Russia, or countries considered as ‘economies in transition’

Clean Development Mechanism (CDM): Defined under Article 12 of the Protocol, CDM projects involve Annex I Parties and non-Annex I Parties. The mechanism allows a Party with an emission limitation or reduction commitment under the Kyoto Protocol (Annex B Party) to implement an emission-reduction project in developing countries. Such projects can earn saleable certified emission reduction (CER) credits, each equivalent to one tone of CO2, which can be counted towards meeting Kyoto target of the investing Annex I Party. The purpose of the CDM is twofold: 1) to assist non-Annex I Parties (host countries) in achieving sustainable development; and 2) to assist Annex I Parties in meeting their emission reduction obligations under the Kyoto Protocol.

Emissions Trading (ET): As a market-based mechanism, ET is the trading of assigned amount units (AAUs) between two Annex I countries. In accordance with Article 12, Parties with emissions limitation or reduction commitment under the Kyoto Protocol (Annex B Parties) can acquire emission units from other Parties with commitments under the Protocol and use them towards meeting a part of their targets. An international transaction log, a software-based accounting system, ensures secure transfer of emission reduction units between countries. An Annex I Party must meet specific eligibility requirements to participate in emissions trading.


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