Frequently Asked Questions
The Kyoto Protocol
What is the Kyoto Protocol and why is it relevant to me?
What are the six greenhouse gases addressed by the Kyoto Protocol?
What are the principal processes which lead to emissions of these six greenhouse gases?
What is the link between the Kyoto Protocol and carbon credits?
Why is Climate Change relevant?
Why should my company be interested in Climate Change at all?
How do I calculate the greenhouse gas emissions for my company?
How do I calculate my carbon dioxide emissions from energy use and other sources?
Emissions trading
Which UK Government department is responsible for the allocation of credits under the EU ETS?
Has the UK Government identified its Designated National Authority?
Can anyone get involved in emissions trading in the UK?
How much is a carbon credit worth?
How do I convert greenhouse gas emission reductions into tonnes of carbon dioxide equivalent?
Climate Change projects
What is a Climate Change project?
How does it differ from a standard project?
What is Joint Implementation (JI)?
What is the Clean Development Mechanism (CDM)?
What are the differences between JI and CDM projects?
Where can I find a simple introduction to Climate Change Projects?
Taking part in a Climate Change project
How do we know if our company should get involved in Climate Change projects?
If we want to develop a project, what can the UK Government offer in the way of assistance?
Is there any UK Government money to fund projects?
What will we have to do to ensure our project is eligible for carbon credits?
Who can help us ensure our project is eligible for carbon credits?
Enquiries from overseas
We would like UK business to invest in our country, how can we let them know what we have to offer?
Answers
Q. What is the Kyoto Protocol and why is it relevant to me?
A. The Kyoto Protocol is an international agreement by which industrialised countries and those in transition to a market economy to reduce emissions of the gases which contribute to the greenhouse effect and so lead to climate change. Developing countries can be parties to the Protocol, but they do not have any binding emissions targets.
Six greenhouse gases are addressed by the Kyoto Protocol. Of these, carbon dioxide (CO2) is of most interest to companies and individuals because it is emitted by the everyday activities of burning fossil fuels for energy and transport, and it is the main contributor to human-induced climate change.
The Kyoto Protocol came into force on 16 February 2005 and many countries are taking steps to reduce their emissions. These steps include changes to energy policy, the introduction of carbon taxes, and incentives for improving energy efficiency. Greater emission reductions than those required by the first stage of the Kyoto Protocol will be necessary in the longer term, and there are advantages to be gained from being aware of the business opportunities arising from the need to reduce emissions and planning for the future.
Q. What are the six greenhouse gases addressed by the Kyoto Protocol?
A. The six greenhouse gases are:
Carbon dioxide (CO2)
Methane (CH4)
Nitrous oxide (N2O)
Hydrofluorocarbons (HFCs)
Perfluorocarbons (PFCs)
Sulphur hexafluoride (SF6).
Q. What are the principal processes which lead to emissions of these six greenhouse gases?
A. Annex 4 of Defra's guide for UK companies wishing to report on greenhouse gas emissions includes information on which greenhouse gases are associated with different processes.
Q. How can I find out about the different greenhouse impacts for the six gases addressed by the Kyoto Protocol?
A. This information is provided in the Glossary and reference section.
Q. Where can I find a simple introduction to the United Nations Framework Convention on Climate Change and the Kyoto Protocol?
A. We recommend that you look at the 'Beginner's Guide to the Convention' on the UNFCCC web site.
Q. What is the link between the Kyoto Protocol and carbon credits?
A. Under the Kyoto Protocol, countries which are parties to the agreement have been assigned targets stipulating the maximum amount of greenhouse gases that they can emit per year over the Commitment Period (2008-2012). In order to meet these targets, they must make changes to their own level of emissions. If necessary they can supplement this action with two other activities. They can undertake projects in other countries to reduce greenhouse gas emissions and offset these reductions against their own target and/or they can buy emissions reductions from others via emissions trading. Emissions reductions are measured in terms of tonnes of carbon dioxide equivalent emission reductions, often termed "carbon credits".
Q. Why should my company be interested in Climate Change at all?
A. UK companies are impacted by Climate Change in a number of ways. The Government's Climate Change Programme and EU legislation have already introduced financial and regulatory measures to reduce greenhouse gas emissions. There are also commercial and reputational benefits to be gained from reducing corporate greenhouse gas emissions. There is no doubt that there will be a long term requirement to further reduce emissions of greenhouse gases, and in the UK significant emphasis is being placed on the role of the non-domestic sector in achieving this reduction.
The launch of the UK emissions trading scheme in April 2002 enables companies to trade emissions reductions, and creates a financial commodity in the form of carbon credits.
A Europe-wide emissions trading scheme launched in 2005 saw the start of international emissions trading. 1400 installations are included in the EU ETS scheme and have mandatory carbon dioxide emission limits. This means they will have to develop plans to ensure their emissions match the allowances they hold.
Companies may also be directly impacted by the physical consequences of Climate Change, such as more extreme weather events, affecting their ability to carry out their business or the demands for their goods and services.
Further details can be obtained from:
Defra - The Climate Change Programme
The Carbon Trust
BERR
- The Renewable Energy Programme
- The Sustainable Energy Policy Network
- BERR/FCO - UK Trade & Investment
Treasury
- The Climate Change Levy
- Enhanced Capital Allowances
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Q. How do I calculate the greenhouse gas emissions for my company?
A. Defra have produced a guide for UK companies wishing to calculate and report on their greenhouse gas emissions. This is available at www.defra.gov.uk/environment/envrp/gas/index.htm
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Q. How do I calculate my carbon dioxide emissions from energy use and other sources?
A. The Defra guide to Environmental Reporting describes the methodology for determining carbon dioxide emissions in the UK and also provides conversion factors in Annex 1. These are taken from the 1996 and 1997 IPCC reports. More up to date figures are presented in our Glossary and reference section.
For emissions in the UK, two key figures are:
1 kWh of grid electricity produces 0.43 kg/CO2
1 kWh of natural gas produces 0.19 kg/CO2
The electricity figure varies over time to reflect the changing fuel mix used to generate grid electricity:
www.defra.gov.uk/environment/envrp/gas/index.htm
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Q. What is emissions trading?
A. Emissions trading involves a company which can make greenhouse gas emission reductions for a relatively low cost selling the rights to those reductions, or carbon credits, to an organisation which would find it more expensive to achieve the same level of reduction through in-house activities.
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Q Which UK Government department is responsible for the allocation of credits under the EU ETS?
A The National Allocation Plan, or NAP, for the UK was drawn up by Defra. It sets out the allocations by sector, in line with a 15.2% reduction in carbon dioxide emissions. Individual allocations by installation will be set by the end of September 2004, see www.defra.gov.uk for more information.
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Q Has the UK Government identified its Designated National Authority?
A The UK Government has established Defra as the Designated National authority, or DNA. As such, Defra is the body appointed to approve the transfer of CDM credits into a UK company’s registry.
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Q. Can anyone get involved in emissions trading in the UK?
A. As part of the EU Emissions Trading Scheme (the EU ETS) it is possible for a company to set up a trading account even if it does not have an emissions cap with which it needs to comply. The company can then take part in speculatively buying and selling carbon credits, and providing services to other companies with a cap.
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Q. How much is a carbon credit worth?
A. There is no simple answer to this, the value partly depends on the type of credit. Broadly speaking there are three types of carbon credit:
A non-Kyoto certified credit
A Kyoto certified credit which cannot be banked for use against future targets
A fully transferable and bankable Kyoto certified credit
The latter will attract the highest price.
The introduction of the EU Emissions Trading Scheme, created a market for EU allowances. The scheme allowed CDM credits to be used for compliance, in advance of the first Kyoto Commitment Period (2008-2012).
As with all tradeable commodities, the price will depend on supply and demand.
As prices are quoted per tonne CO2e, when savings are made in more potent greenhouse gases such as methane (which has 21-23 times the global warming potential of CO2), the value of a tonne of emissions reduced or avoided is considerably greater.
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Q. How do I convert greenhouse gas emission reductions into tonnes of carbon dioxide equivalent?
A. For carbon/carbon dioxide conversions:
1 tonne of carbon dioxide = 0.27 tonnes of carbon
1 tonne of carbon = 3.67 tonnes of carbon dioxide
For conversion factors from other greenhouse gases to carbon dioxide equivalent, see the table under Glossary and reference.
Note, the common unit for credits is tonnes of carbon dioxide equivalent (tCO2e)
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Q. What is a Climate Change project?
A. A climate change project reduces greenhouse gas emissions and is eligible for tradeable emission reduction credits. If the credits are certified Kyoto compliant credits, the projects may be termed a "Kyoto Mechanism" project.
Projects which reduce greenhouse gas emissions are likely to be in the following areas:
Improved energy efficiency (energy or transport)
Lower carbon intensive forms of energy supply (energy or transport)
Reduced industrial process emissions
Improved agricultural practices and livestock management
Management of biodegradeable waste
Forestry and land use practices to store carbon
Underground storage of carbon dioxide (e.g. in disused oil reservoirs)
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Q. How does a climate change project differ from a standard project?
A. A climate change project differs from a standard project in two ways:
1. The project must lead to a reduction in greenhouse gas emissions - either an absolute reduction or a reduction compared to the common alternative way of carrying out the same activity
2. The project has the potential to accrue emission reduction credits which are tradeable and have a monetary value.
There are a number of procedures which must be followed to ensure that a project is an approved climate change project, with time and cost implications. However, the carbon credits which accrue can make the process worthwhile, resulting in a net benefit to the project developer. Benefits include assistance in meeting a company's own emission reduction targets, a revenue stream from the value of the emissions reductions, or a means to obtain capital finance for the project.
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Q. What is Joint Implementation (JI)?
A. Joint Implementation (JI) is the term used to describe a climate change project carried out in a country with its own national emissions target agreed as part of the Kyoto Protocol i.e. an Annex I country. It involves the transfer of these reductions, in the form of emissions reduction units (ERUs), from the host country to the investor country. Likely host countries are those which can comfortably reach their target and are prepared to transfer the additional reductions. They include those in Eastern Europe and the Former Soviet Union.
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Q. What is the Clean Development Mechanism (CDM)?
A. The Clean Development Mechanism (CDM) is the term for a climate change project carried out in a country without its own national emissions target i.e. a developing "non-Annex I" country. It involves the transfer of these reductions, in the form of certified emissions reductions (CERs), from the host country to the investor country. Examples of host host countries include China, India and South Africa, and those in South-East Asia and Latin America.
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Q. What are the differences between JI and CDM projects?
A. There are two main differences between JI and CDM projects. These relate to the country in which the project is carried out and the credit allocation procedure. Both investments will deliver emission reductions credits that may be accepted for international trading and count towards meeting national Kyoto targets.
A JI project is undertaken in a developed country which has an emissions reduction target - an Annex I country. The carbon credits which accrue to a JI project are termed Emission Reduction Units (ERUs) and they are issued by the host country's Government.
A CDM project is undertaken in a developing country which has no emission reductions target - a Non-Annex I country. In addition to leading to a reduction in greenhouse gas emissions, the project must also contribute to sustainable development in the host country. The carbon credits which accrue to a CDM project are termed Certified Emission Reductions (CERs) and they are issued by an international body called the CDM Executive Board.
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Q. Where can I find a simple introduction to CDM and JI Projects?
A. Introductory guides have been produced by the Climate Change Projects Office. You can download our beginners' guides here
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Q. How do we know if our company should get involved in Climate Change projects?
A. The CCPO offers assistance to UK companies considering becoming involved with Climate Change projects. We can provide guidance and specific project advice to enable companies to determine the potential benefits and make a decision.
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Q. If we want to develop a project, what can the UK Government offer in the way of assistance?
A. The "first stop shop" for project related advice and information is the UK Government's Climate Change Projects Office. We have introductory guides, we offer bespoke advice over the phone or in person, and we can advise about relevant activities being undertaken by other Government departments (for example trade missions promoting environmental goods and services overseas).
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Q. Is there any UK Government money to fund projects?
A. It is not the Government's policy to directly fund specific Climate Change projects. However, assistance is provided in a number of ways. The Climate Change Projects Office offers free advice, and Government funding has contributed to capacity building projects which enhance a country's knowledge of climate change issues and their ability to engage in the Climate Change project mechanisms. The Department for Business Enterprise and Regulatory Reform (BERR) offers support to companies wishing to export their goods and services. We also recommend that you visit the UK Trade & Investment web site for information on trade missions and other events, and market and sector specific information.
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Q. What will we have to do to ensure our project is eligible for carbon credits?
A. To be eligible for Kyoto certified credits, there are five basic steps.
You need to:
- develop a project proposal and get agreement in principle for the project from the host country
- identify the existing emissions (known as the baseline), calculate the level of emissions reductions associated with the project, confirm how the calculation was carried out, and describe how the emissions reductions will be monitored
- have the project proposal approved by the host nation for JI projects, and for CDM projects have the project audited and then submit it for international approval to the CDM Executive Board
- deliver the project and monitor the savings
- submit the monitoring for third party verification, based on which the carbon credits will be issued
The Climate Change Projects Office is able to provide you with guidance on the individual steps.
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Q. Who can help us ensure our project is eligible for carbon credits?
A. The Climate Change Projects Office is available to discuss individual project proposals, their likely eligibility as Joint Implementation (JI) or Clean Development Mechanism (CDM) projects, and the processes involved in developing the projects.
We can provide information about the potential host country, designated UK Government approval for a project, and, if appropriate, from the Designated National Authority represented by Defra and Embassy introductions via the Foreign and Commonwealth Office (FCO).
We provide more information on this web site, and/or you can make an appointment to discuss projects over the telephone or in person.
The services we offer are free and understandably our assistance is limited by staff and time resources. Once you have a viable project proposal, you may wish to engage support from private service providers such as environmental or engineering consultants, lawyers, financiers, brokers and ultimately traders.
We can advise you on where to find contact details for UK climate change service providers.
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Q. Can we come and talk to the Climate Change Projects Office about the activities of our company, to see if we should be involved?
A. You are welcome to make an appointment to talk to us about your company's activities in general or about specific project proposals. We may also be able to inform you about relevant seminars.
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Q. We would like UK business to invest in our country, how can we let them know what we have to offer?
A. We invite you to let us know about the types of projects you are keen to host, and if appropriate we will publicise this information to UK companies. Please email us with details of your project and a named contact who can provide further information.