Kyoto Protocol

The Kyoto Protocol was signed in 1997 at the third UNCCC. It was the first major international climate change agreement and includes individual targets to reduce greenhouse gas emissions for every signatory. It commits only developed countries to limit and reduce GHG emissions in accordance with agreed individual targets. The Convention itself only asks those countries to adopt policies and measures on mitigation and to report periodically.

First establishment of flexible market mechanisms

Clean development mechanism - allows a country with an emission-reduction or emission-limitation commitment under the Kyoto Protocol to implement an emission-reduction project in developing countries. Such projects can earn saleable certified emission reduction  credits, each equivalent to one tonne of CO2, which can be counted towards meeting Kyoto targets. 

Joint implementation - allows a country with an emission reduction or limitation commitment under the Kyoto Protocol (Annex B Party) to earn emission reduction units (ERUs) from an emission-reduction or emission removal project in another Annex B Party, each equivalent to one tonne of CO2, which can be counted towards meeting its Kyoto target.

Emissions trading - allows countries that have emission units to spare - emissions permitted them but not "used" - to sell this excess capacity to countries that are over their targets. Thus, a new commodity was created in the form of emission reductions or removals. Since carbon dioxide is the principal greenhouse gas, people speak simply of trading in carbon. Carbon is now tracked and traded like any other commodity. This is known as the "carbon market."

In 2012, the Doha Amendment to the Kyoto Protocol was adopted for a second commitment period, starting in 2013 and lasting until 2020. However, the Doha Amendment has not yet entered into force since the instruments of acceptance required for its entry into force were not met. The EU has signed the Doha Amendment.