Biofuels Initiative
Engaging the private sector in CDM
EIT capacity building
CDM in rubber study
OPEC study
CDM in Least Developed Countries
Plurilateral GHG trading

Plurilateral GHG trading

Title: Support for the Development of a Plurilateral GHG Emissions Trading System
This project was carried out by the UNCTAD's GHG Emissions Trading
Project Duration: 2 1/2 years
Starting Date: 1 February 1999 (successfully concluded in 2002)
Coordinating Agency: UNCTAD UN Agencies Involved: UNFCCC, UNEP, UNIDO
Associated Agencies: Earth Council
Budget: US$ 1,244,300

Brief Description:

The Project provided support to interested governments, corporations and non-governmental organizations for the development of a plurilateral market for trading in greenhouse gas emission allowance and certified emission reduction credits, in accordance with the Kyoto Protocol, and the decisions of the fourth session of the Conference of the Parties (COP4). An informal group of experts (the "Plurilateral Emissions Trading Group") was initiated to reflect on the objectives and activities of the project and to advise the executing agency on the continuing relevance of the activities to the targeted beneficiaries. The participants strongly supported the project's goal of facilitating the emergence of international emissions trading via the establishment of a network of bilateral and plurilateral agreements among countries with domestic emissions trading programmes, in accordance with the objectives of the Kyoto Protocol. UNCTAD convened the group on a twice yearly basis.

Objectives:

The project focused on:

• Developing a sound international legal framework to accommodate cross-border transactions,
• Assisting governments to define adequate domestic regulatory and sudivervisory frameworks,
• Assisting market makers to establish appropriate trading rules, infrastructure and institutions, and
• Providing training and capacity building for developing countries and countries with economies in transition.

Outputs and Activities:

• International Economic and Legal Framework - This framework provided the protocols, rules and guidelines to govern the plurilateral emissions trading system. The agreement was designed in accordance with the UNFCCC and Kyoto Protocol.
• Model domestic legislation (survey of best practices) - This survey assisted participating countries in the development of their national infrastructure for international emissions trading. It addressed monitoring, verification, certification, data-gathering and reporting protocols, public access to information, rules for transferring and recording ownership rights in allowances and credits, as well as legal and administrative measures for ensuring compliance by sources with national emission targets. The survey provided input into the IPA.
• Technical guidelines on domestic allowance allocation practices - The project prepared a set of technical guidelines on the allocation of allowances to domestic emission sources in order to assist governments in designing acceptable allowance allocation methodologies and at the same time help ensure a "level playing field" at the international level.
• Technical guidelines on emissions and sinks monitoring, verification, and certification - Monitoring functions of emissions and sinks were carried out domestically in accordance with agreed guidelines. The project developed technical guidelines that included requirements for record keeping and reporting by sources and sequestration projects. Also included the guidelines on data collection, emission estimation and reporting, taking into account the work of relevant organizations such as the IPCC and the guidance provided by the subsidiary bodies of the UNFCCC.
• Guidelines on noncompliance and enforcement - The project developed guidelines to assist governments in dealing with domestic cases of noncompliance with agreed emissions limits. A variety of enforcement options exist ranging from allowing the market place to devalue the commodity to the imposition of sanctions such as suspension of trading, and monetary fines. Such decisions were reached in accordance with the decision making procedures associated with the IPA. The guidelines are helpful in setting up certain thresholds for noncompliance before sanctions would be imposed.
• Trading rules (transfers and registration) - In addition to and in conformity with any relevant provisions of the Kyoto Protocol, the project prepared model rules and regulations for traders with respect to the transfer and acquisition of allowances and credits, registration procedures, transferring titles, delivery, performance warranties, financial guarantees, transfer agents, and dispute settlement. The rules should be broad enough to apply to institutional trading houses (brokers, hedgers, speculators) and individual traders. The use of simulation models and interactive games was explored.
• Training manual and modules - The project developed a comprehensive training manual, including specialized training modules, based on the various technical outputs of this project and other materials produced by UNCTAD in this area. The manual and modules were developed using modern training and informatics methods, including Internet-compatible applications. The manuals are intended to support the execution of national training, institution and capacity building programmes in developing countries and countries with economies in transition.
• National training, institution and capacity building for developing countries and countries with economies in transition - Organizing and conducting national and regional training programmes for participating countries constituted an essential part of the activities of this project and the Policy Forum. The training programmes aimed to assist both policy makers and market makers to put in place efficient institutional and regulatory frameworks and adequate market mechanisms for international emissions trading. Priority was given to the needs of developing countries and countries with economies in transition. In that regard, the project provided technical support, education and training for non-Annex I countries wishing to explore issues related to voluntary participation in the international emissions trading system.