12 March 2009: The UNFCCC Secretariat has released a document (FCCC/KP/AWG/2009/INF. 2) on a further elaboration by the Chair of the Ad Hoc Working Group on Further Commitments for Annex I Parties under the Kyoto Protocol (AWG-KP) of possible improvements to emission trading and the project-based mechanisms, namely the clean development mechanism (CDM) and joint implementation (JI) under the Kyoto Protocol.

The elaboration builds on the elements contained in annexes I and II of the report of the AWG-KP at the first part of its sixth session, an earlier elaboration of these issues by the Chair and further input submitted by parties. Annex I to the document reviews possible improvements to emissions trading and the project-based mechanisms under the Kyoto Protocol for the period after 2012 with potentially significant implications for the ability of Annex I parties to achieve mitigation objectives. Annex II reviews other possible improvements to emissions trading and the project-based mechanisms under the Kyoto Protocol.
Under Annex I, for the CDM, elements consist of: including other land use, land-use change and forestry (LULUCF) activities; introducing a cap for newly eligible LULUCF activities; including carbon capture and storage, nuclear activities and sectoral CDM; introducing crediting on the basis of nationally appropriate mitigation actions; differentiating the eligibility of parties through the use of indicators; and improving access to CDM project activities by specified host parties. For JI, proposals include: introducing modalities for treatment of CDM project activities upon graduation of host parties; and including nuclear activities and projects that reduce greenhouse gas emissions from deforestation and forest degradation. Regarding emission trading elements, proposals include: introducing emissions trading based on sectoral targets; and introducing the linking of emissions trading schemes in Annex I parties to voluntary emissions trading schemes in non-Annex I parties. Cross-cutting issues are also highlighted such as: relaxing or eliminating carry-over (banking) restrictions on Kyoto units; changing the limit on the retirement of temporary certified emission reductions and long-term certified emission reductions; introducing borrowing of assigned amount from future commitment periods; and extending the share of proceeds.
Regarding Annex II, under the CDM, proposals include: introducing a different supervisory structure and institutional arrangement in case of modification of the scope of the CDM; differentiating the treatment of types of project activities by party; introducing alternative accounting rules for afforestation and reforestation project activities to increase demand; using global temperature potentials instead of global warming potentials; including technology transfer as a criterion for the registration of project activities; and revising criteria for accreditation of designated operational entities, especially financial, to enhance the accreditation of designated operational entities based in non-Annex I parties.
For JI, proposals include: ensuring that approaches for LULUCF projects under
JI are in line with the treatment of LULUCF under Article 3, paragraphs 3 and 4, of the Kyoto Protocol; introducing approaches for LULUCF projects under JI that are parallel to the treatment of CDM afforestation and reforestation project activities; introducing crediting on the basis of nationally appropriate mitigation actions; changing the composition of the JI Supervisory Committee membership to ensure equitable representation of parties; allocating proportions of demand to project types that contribute more to the sustainable development of host parties; using global temperature potentials instead of global warming potentials; and including technology transfer as a criterion for the final determination for projects.
Regarding emission trading, proposals include: eliminating restrictions on the trading and use of certain Kyoto unit types under national and regional emissions trading schemes; and enhancing equivalence among Kyoto unit types and reducing the commitment period reserve. Proposals are also made under cross-cutting issues to reduce the number of unit types under the Kyoto Protocol and to introduce a mid-commitment period assessment and review process. [The Document]