Shepherd and Wedderburn LLP
  March 23, 2005 - Scotland

Opportunities in Kyoto
  by Catherine Tracey

After long years of fierce debate, the Kyoto Protocol finally came into force on 16 February 2005, imposing obligations on states parties to reduce global greenhouse gas emissions. This article takes a look at the background to the Protocol, and the many new and varied opportunities for businesses in Scotland and across the globe. The Protocol itself was adopted at the Third Conference of the Parties to the United Nations Framework Convention on Climate Change in Kyoto on 11 December 1997. It then had to be ratified by 55 countries, which had to include producers of 55% of the developed world's greenhouse gas emissions. With Russia's ratification in November 2004, this threshold was met. Developed countries and those with emerging market economies each have their own specific emissions reduction targets, which are outlined in Annex B to the Kyoto Protocol. Developing countries do not have any specific targets, but instead have qualitative obligations to monitor and report on emissions levels. Under the Protocol's terms, the UK is required to reduce its greenhouse gas emissions by 12.5 per cent based on its 1990 emission levels, between 2008 and 2012. Latest reports indicate that the UK is on target to meet this goal, with Scotland making a particularly positive contribution. Here, emissions of carbon dioxide, the main greenhouse gas, fell by 3.2% between 1990 and 2002, despite growth of over 25% in the Scottish economy during the same period. Further reductions can be met by a number of methods set out in the Protocol, known as the Kyoto "flexibility mechanisms". For instance, UK companies can collaborate with companies in other developed countries to reduce emissions through the provision of energy efficient technologies. Equally, UK companies can also engage in emissions reduction projects in developing countries. Another option is for UK companies to participate in emissions trading, and effectively buy and sell emissions allowances in various trading markets. Each of these methods of reducing emissions opens a window of opportunity for Scottish businesses as it is generally more cost-efficient to comply with legislative emissions reduction obligations by making use of the flexibility mechanisms, rather than by downscaling domestic production levels. But the Kyoto Protocol is not the only issue on the Scottish climate change agenda. Even before the Kyoto Protocol entered into force in mid-February, UK businesses were affected by the emissions reduction obligations imposed by the EU Emissions Trading Scheme, which started on 1 January 2005. In addition climate change has also been singled out as one of the key priorities for the UK’s presidency of the EU (which commences in July), and the UK's chairmanship of the annual G8 Summit which is due to take place in July at Gleneagles. Further the Scottish Executive has launched its Review of the Scottish Climate Change Programme, which was originally published in November 2002. The original programme looked at means of reducing emissions in areas of devolved competence. The review aims to assess whether these measures need to be strengthened or whether new measures need to be introduced. The consultation is expected to end on 25 February 2005. With climate change taking an increasingly central role in Scottish political debate, businesses would be well advised to remain informed of developments.


Footnotes:
Catherine Tracey is a solicitor specialising in public law with commercial law firm Shepherd+ Wedderburn 44 (0)131 473 5474.