Issues in linking registries and the transaction log Pre-sessional consultations on registries Bonn, 2-3 June 2002 Andrew Howard UNFCCC secretariat ahoward@unfccc.int Technical presentation of text Relatively new text in its current form Elements brought together from other texts in the CNT

Scope of presentation Policy frameworks - Use of the Kyoto mechanisms - Domestic and regional emission trading schemes Relationship between domestic, regional and Article 17 trading Considerations in linking trading schemes Scope is the parts of the Article 7.4 text conceptual elaboration of AA modalities – from Art7 registries are their operationalisation – from mechs C&A is database and reports for summarising emission and AA data – for the compliance assessment – from Art8 Doc references Presentation represents current texts (no dec 5/CP.6) These could change in future, but this is current stance

Registries to meet policy needs Use of Kyoto mechanisms Implications for registries Add domestic / regional policy frameworks (scope for individual policy features) Use by Party and entities Also domestic/regional trading 4 Add entity holding accounts; entity use of international transactions Use by Party Entities for CDM and JI 3 Add international transfers and acquisitions; commitment period reserve limits Use by Party No entities participation 2 One holding account (Party) for issuance; cancellation / retirement functions; sink limits No use of the mechanisms 1 Would Parties wish to link DET or RET schemes to others?

Necessary registry links By Party and entities Also domestic/regional ET 4 By Party Entities for CDM and JI 3 By Party No entities participation 2 No use of the mechanisms 1 Use of Kyoto mechanisms Registry links to the outside world For RET, allow entity use of R-R links For inter-DET trading, allow such links also Add links downward to entities Allow entities to use the registry-registry links Add links to other registries No links to other registries Link to transaction log (issuance / retirement)

Options for DET/RET and the transaction log DET schemes: 1. Isolated DET (with no inter-DET trading) 2. Linked DET (with inter-DET trading) RET schemes: 3. RET only 4. RET with further DET schemes but only in non-RET sectors An RET scheme may be further linked with other RET or DET schemes Unit options: Use AAUs, RMUs, ERUs and CERs (Kyoto units) Use other units specific to the DET or RET DET/RET units: Need conversion to Kyoto units for international trade Or international trades need backing with Kyoto unit trades Either way: International trades need monitoring by the transaction log

DET, RET and Article 17 emissions trading Kyoto Protocol Article 17 trading RET DET Registry A Registry B Registry C Registry D Registry E Registry F Article 17 trade Inter-DET trade RET trade RET trade or an inter-DET trade

Considerations in emissions trading links Ability to use lowest cost abatement opportunities internationally  to reduce costs of mitigating climate change Protecting the stringency of entity obligations under DET or RET  entity obligations may be influenced by linking to other Parties’ schemes Respecting necessary limits set by the Marrakesh Accords  commitment period reserve, LULUCF limits and supplementarity Environmental integrity  to ensure targets (environmental goals) are met and to increase credibility Transaction costs  to enhance efficiency and not lose benefits of trading to other schemes Equity considerations  can influence chances of implementing DET or RET schemes

Legal considerations in emissions trading links Current or new legislation will be needed for the establishment of registries Legal considerations in linking registries How are units legally defined? Are units from other Parties recognized? What restrictions apply under relevant domestic law? What constitutes legal ownership of the units? What constitutes a change in legal ownership? Is it irrevocable? At what point does a transferred unit change legal jurisdiction? What is the legal status of the transaction log? What dispute resolution procedures should apply?

Issues in linking registries and the transaction log www.unfccc.int Andrew Howard UNFCCC secretariat ahoward@unfccc.int