Trading through the flexibility mechanisms

Since the adoption of the Kyoto Protocol in 1997, the flexibility mechanisms have moved from formal definitions and scope to practical tools, ready for implementation, with a number of initiatives giving effect to them in advance of the entry into force of the Kyoto Protocol. ¹ The focus on implementation has been underpinned by the completion of the detailed rules on JI, CDM and IET adopted by COP-7 in the Bonn Agreement and the Marrakesh Accords, including the rules relating to carbon sinks through land use, land-use change and forestry (LULUCF) activities under Articles 3.3 and 3.4. ² Rules and modalities for CDM sinks projects were agreed by COP-9 held in Milan in December 2003. All these additional rules have a significant bearing on the degree of reliance Parties might place on the Kyoto mechanisms, the carbon price and hence the amount of trading that might now be expected compared with expectations about the size of the carbon market in 1997.