Market potential for Kyoto mechanisms—estimation of global market potential for co-operative greenhouse gas emission reduction policies

The Kyoto protocol established by the Parties to the United Nations Framework Convention on Climate Change in December 1997 includes three articles that provide a framework for co-operative greenhouse gas (GHG) emission reduction activities between different parties namely, Article 6 on Joint Implementation (JI), Article 12 on the Clean Development Mechanism (CDM) and Article 17 that facilitates emission trading among Annex B countries. The current paper estimates the potential demand and supply of GHG emission reduction projects with a main emphasis on the supply of CDM projects from developing countries (DCs). It is concluded that the demand for GHG emission reduction projects from Annex B countries, including domestic actions in Annex B countries, JI projects, emission trading and CDM projects in total will be between about 500 and 1300 Mt C in 2010. The demand for CDM projects supplied by DCs will most likely not be very large compared with the total future GHG emissions in these countries according to recent scenario work undertaken by the IPCC. National studies for DCs have concluded that GHG emission reductions in the energy sector in the order of magnitude of 10–15% of future baseline emissions can be achieved for a cost below $25 per tonne of CO2.