It is a UN-sponsored agreement signed in 1997 by 59 countries in the city of Kyoto, Japan. The protocol is listed on the United Nations Framework Convention on Climate Change (UNFCCC), whose objective is to reduce emissions of greenhouse gases (GHG) in industrialized nations—through targets which correspond on average to a 5% reduction over the amount of gases emitted in 1990 on a country by country basis—and to establish a sustainable development model for emerging countries. The full text of the Protocol is available at http://unfccc.int/essential_background/kyoto_protocol/background/items/1351.php.

It is a phenomenon caused by the accumulation of certain gases in the atmosphere, known popularly as greenhouse gases or GHGs, which hold heat within the surface of the Earth and contribute to its warming. The Kyoto Protocol states that the following GHGs should be regulated: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbon (HFC), perfluorocarbon (PFC), and sulfur hexafluoride (SF6). The increase in the concentration of these gases in the atmosphere is a direct result of man-made emissions, mainly through the following activities: burning of fossil fuels and biomass (CO2 and N2O); organic matter decay (CH4); industrial activities, refrigeration processes, use of propulsors, expanded foams and solvents (HFCs, PFCs, and SF6); and the usage of fertilizers (N2O).

It is a treaty signed in 1992 on the occasion of the UN Conference on Environment and Development during the Rio de Janeiro Earth Summit, which aims to stabilize atmospheric GHG concentration so as to prevent anthropogenic interference (i.e. resulting from human activity) that is harmful to the climate system. The convention establishes “common but differentiated responsibilities” from participating countries (the parties)—hence the different treatment given to Annex B countries (a Kyoto Protocol document which lists the developed countries for which emission reduction targets were set) and to emerging market countries. The full text of the Convention can be found at http://unfccc.int/essential_background/convention/background/items/2853.php

Conference of the Parties (i.e. the United Nations Framework Convention on Climate Change signatory countries). It represents the UNFCCC’s supreme body responsible for reviewing the implementation of the Convention. The COP has met regularly since 1995 in one after another of the participating countries. The 3rd COP session in 1997 led to the adoption of the Kyoto Protocol. The 11th COP session will be held in Montreal, Canada, from November 28 to December 9, 2005.

On February 16, 2005, 90 days after Russia ratified the Protocol. The Russian ratification led to the Protocol’s entry into force, once the condition of being ratified by 55 parties responding for at least 55% of global emissions was met. Until that date, with the addition of the Russian Federation, a total of 141 countries had signed the treaty corresponding to 61.6% of total global GHG emissions.

The industrialized nations (listed on Annex B of the Kyoto Protocol) must comply with their emission reduction targets—on an average of 5% of their 1990 levels—during the first commitment period, which runs from 2008 to 2012. For the second period, which begins after 2012, emission reduction targets have not yet been set.

They are technical operational arrangements regulated by the Kyoto Protocol which allow countries or companies to use carbon credits, thus creating additional facilities that the parties listed on Annex B can use to help meet their emission reduction commitments. These mechanisms are also meant to encourage emerging countries to reach an adequate model of sustainable development. The Protocol’s three mechanisms are: Emissions Trading (between Annex B parties in which a country that has reduced emissions to a level below its required amount may transfer its excess of emission reduction to another party who has not yet met its emission reduction target); Clean Development Mechanism (CDM); and Joint Implementation (JI)—which relate to the implementation of GHG emission reduction projects in Annex B countries. The CDM is the only mechanism applicable to Brazil.

The concept underlying the CDM is that of the voluntary reduction of GHG emissions or their sequestration from the atmosphere by a company based in a developing country, creating credits which can be traded in the global carbon market with industrialized countries (or with their companies) in need of these “credits” to meet their Kyoto Protocol targets. This flexibility mechanism, therefore, enables countries to reduce their global GHG emissions while also providing an attractive alternative method to foster sustainable development in the emerging market countries.

In order to qualify for recognition under the Kyoto Protocol and generate carbon credits (Certified Emission Reductions, or CERs):

– The project participant (i.e. a company) must prepare a Project Design Document (PDD) (see question 10);

– The Designated Operational Entity must validate the methodology used in the PDD (see question 14);

– The Designated National Authority must approve the proposed project (see question 15);

– The project activity must then be registered with the CDM Executive Board (see question 13);

– The project participant must carry out the monitoring of the CDM activity (see question 18);

– The Designated Operational Entity performs the verification and certification of the GHG emission reduction resulting from the project;

– The CDM Executive Board issues the CERs.

It is a document prepared by the CDM participant (a company) containing the following information: General description of the project; crediting period; baseline and monitoring methodologies (see question 11); calculation of GHG emission reductions by sources; environmental impacts; stakeholders’ comments; and information on public funding sources from Annex I parties (i.e. developed countries listed on the UNFCCC) for the project. The PDD forms are available at http://cdm.unfccc.int/Reference/Documents

The baseline—or reference scenario—of a CDM project comprises the current level and the evolution of GHG emissions which might occur if the CDM activity were not implemented. This scenario is used for calculating emission reductions (carbon credits) to be generated by the project. The baseline follows a pre-approved methodology as set by the CDM Methodology Panel (a group of scientists from various countries whose aim is to provide technical support to the CDM Executive Board, as well as evaluate and suggest recommendations on new baseline and monitoring methodologies, which are forwarded to the Board for approval within the CDM framework). An updated list of approved baseline methodologies can be found at http://cdm.unfccc.int/methodologies/PAmethodologies/approved.html

Yes, it does. When preparing the Project Design Document (PDD), the participant must indicate the crediting period the project is applying for, and choose from one of the following alternatives:

– In the case of afforestation and reforestation projects, a maximum of 20 years—renewable two times at the most—or a maximum of 30 years without the possibility of renewal;

– For CDM projects which pertain to other sectoral scopes, a maximum of 7 years—renewable two times at the most—or a maximum of 10 years without renewal.

It is a UNFCCC body which supervises the Clean Development Mechanism. The CDM Executive Board is composed of representative members from parties to the Kyoto Protocol. In addition to accrediting Designated Operational Entities, the Board also issues CERs for the projects which meet all CDM requirements.

It is an entity qualified by the Conference of the Parties (COP) by recommendation of the CDM Executive Board with the purpose of validating proposed CDM projects or verifying and certifying the GHG reductions resulting from project-based activities. To be eligible to operate in Brazil, the DOE must be recognized by the National Designated Authority (DNA) and be fully established in the country. The updated list of DOEs accredited by the CDM Executive Board can be obtained at http://cdm.unfccc.int/DOE/list

It is a governmental body formally appointed by a country in order to approve projects proposed in its territory within the CDM scope. This approval is one of the basic requirements for the project to be submitted to the CDM Executive Board. The DNA in Brazil is an Interministerial Committee for Global Climate Change composed of the Chief of Staff of the President of the Republic and the following Brazilian Ministries: Sciences and Technology (the Committee coordinator); Foreign Affairs; Agriculture, Livestock and Supply; Transportation; Mines and Energy; Planning, Budget and Management; Environment; Development, Industry and Foreign Trade; Municipalities; and Finance.

The DNA only receives for approval projects which were previously validated by an accredited DOE. The submission rules are described in Resolution No. 1, of September 11, 2003, of the Brazilian Interministerial Committee for Global Climate Change. This regulatory instrument is available at http://www.mct.gov.br/clima/comunic/pdf/Resolução01ing.pdf. The updated list of projects approved by the Brazilian DNA is at http://www.mct.gov.br/clima/ingles/cigmc/projaprov.htm

The registration represents the formal acceptance and recognition of a project by the CDM Executive Board as a validated CDM activity. An updated list of registered projects can be downloaded from http://cdm.unfccc.int/Projects/registered.html

It involves the collection of information about the project which is carried out by the project participant during the execution of the underlying activities. The objective of this collected information is to measure the project’s anthropogenic emissions of greenhouse gases. The consistency of the data collated in the monitoring report must be verified and certified by an independent entity (the Designated Operational Entity) and further submitted to the CDM Executive Board, thus allowing the corresponding CERs to be issued.

It is a popular term used to describe the trading systems for GHG emission reduction credits. There are two types of carbon markets within the Kyoto Protocol: Markets based on credits generated by emission reduction projects (Clean Development Mechanism and Joint Implementation Projects), and allowance markets.

It is a trading system which is more applicable to the Annex B countries since it relates to the limits set on total GHG emissions within a determined geographical area. For example, the government of an Annex B country establishes maximum limits of allowed emissions for various industrial sectors in that country. In this context, companies are allowed to sell their spare allowance to other companies that have failed to achieve their reduction targets. The first model of this system to enter into force worldwide was the European Emissions Trading Scheme (EU ETS), which went on stream on January 1, 2005, in line with the Kyoto Protocol propositions.

It is the market related to the purchase and sale of CERs, which can also be traded by companies established in Annex B countries as a means to abate their emission reduction targets. The CER is a unit issued by the CDM Executive Board as a result of the CDM project activities. One CER represents the non-emission or sequestration of one tonne of carbon dioxide equivalent from the atmosphere.

The set of institutions, regulations, project registration systems, and trading centers undergoing implementation in Brazil by the Brazilian Mercantile & Futures Exchange (BM&F) and the Rio de Janeiro Stock Exchange (BVRJ) in partnership with the Brazilian Ministry of Development, Industry and Foreign Trade (MDIC). The MBRE aims to stimulate the development of CDM projects and create business opportunities in the environmental market in an organized and transparent manner. BM&F will provide MBRE participants with the Carbon Facility and an organized online environment for emissions trading.

It is an electronic system for the collation of data related to DOE validated CDM projects, and projects which are still undergoing validation/certification. Qualified investors who have pre-registered at BM&F can express their interest in purchasing carbon credits to be generated from CDM projects. The BM&F Carbon Facility is available on the BM&F and BVRJ websites.

The applicant should register on the BM&F Internet system and after the registration is approved, fill out and submit the online project registration form which can be found on the BM&F and BVRJ websites. In the case of projects which are already validated under the Kyoto Protocol, they should be submitted by using the aforementioned online forms, and include their respective Project Design Documents and Validation Reports.

Through the BM&F Carbon Facility, governmental agencies, multilateral entities, NGOs, investment funds, and companies can express their interest in the purchase of CERs in the forward and option markets, after they complete and send their online registration form (and have their registration approved by BM&F).

In the first phase, CERs will be traded at BM&F/BVRJ in the forward and option markets through electronic registration of Emission Reduction Purchase Agreements.

CER trades must follow market principles of transparency and equitable practice. Further details will be available in early 2006 on the BM&F Carbon Facility website.