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TABLE OF CONTENTS FOREWORD........................................................................................ III ABOUT THE AUTHORS. ..............................................................VII INTRODUCTION............................................................................... 1 CHAPTER 1 – Rise of the carbon markets..................................... 4 A. Introduction...................................................................................... 4 B. General carbon market characteristics............................................. 5 I. The cap........................................................................................ 5 II. The trade...................................................................................... 7 C. Regional carbon markets................................................................ 12 I. The Chicago Climate Exchange.................................................. 12 II. New South Wales, GGAS, RGGI, CCAR, and WCI.................. 15 D. National schemes ........................................................................... 20 E. Multilateral agreements.................................................................. 22 I. The UNFCCC and Kyoto Protocol .......................................... 23 II. The European Union Emissions Trading Scheme....................... 29 F. Voluntary trading – beyond cap-and-trade.................................... 31 I. Introduction to voluntary trading.............................................. 31 II. The VER market........................................................................ 33 G. Conclusion...................................................................................... 40

CHAPTER 2 – International climate legislation......................... 41 A. Introduction.................................................................................... 41 B. The science...................................................................................... 42 I. Significance of science in climate policy..................................... 42 II. Early beginnings........................................................................ 43 III. Linking science to policy............................................................ 44 C. The UNFCCC................................................................................. 46 I. The UNFCCC’s guiding principles............................................ 47 II. Substantive provisions................................................................ 54 III. Structure and procedure............................................................. 57 V


Table of Contents

D. The Kyoto Protocol......................................................................... 59 I. Development of the Kyoto Protocol........................................... 59 II. Legal requirements..................................................................... 70 E. Conclusion...................................................................................... 84

CHAPTER 3 – Practical considerations for carrying out JI projects.............................................................................. 85 A. Introduction.................................................................................... 85 B. JI project participants..................................................................... 85 C. Domestic laws and policy............................................................... 86 I. Domestic legal issues.................................................................. 87 II. The Designated Focal Point . ..................................................... 91 III. Legal nature and scope of host country letter of approval........... 93 D. Structuring the project................................................................... 95 I. Establishing legal ownership of ERUs ....................................... 96 II. Financing JI projects.................................................................. 99 E. JI in Russia – a test case................................................................ 103 I. Overview................................................................................. 103 II. Implementing JI in Russia ...................................................... 107 III. Implementing GIS .................................................................. 113 F. Conclusion.................................................................................... 114

CHAPTER 4 – Reaching a post-2012 agreement...................... 116 A. Introduction.................................................................................. 116 B. Legal and procedural framework................................................. 118 I. Legal framework for establishing new commitments . under the UNFCCC................................................................ 118 II. Legal framework for establishing new commitments . under Kyoto............................................................................. 120 C. Main issues in post-2012 negotiations......................................... 120 I. Overview of the main issues...................................................... 120 II. Structural issues in setting the cap............................................. 121 III. Flexibility mechanisms............................................................. 128 D. Progress in the negotiations ........................................................ 130 I. Main negotiating blocs . .......................................................... 131 II. COP-11/CMP-1 – Montreal................................................... 131 III. The Bali Action Plan................................................................ 133 IV. Poznań negotiations................................................................. 134 E. The road ahead.............................................................................. 135

GLOSSARY......................................................................................... 138 VI


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