Tracking Transfers

International Emissions Trading and Joint Implementation Requirements. While participation in the international flexibility instruments is strictly optional, countries that wish to do so will face an additional set of minimum reporting requirements -- that might be called eligibility rules. Two criteria seem quite likely. First, just as countries keep track of their actual emissions, they must also account for the adjustments to their assigned amount. To this end, if CEE countries choose to participate in joint implementation and/or international emissions trading, they will need to create and maintain a system that tracks how each and every transaction -- debiting transfers and crediting acquisitions -- affect their adjusted assigned amounts. With such a tracking system, countries would fulfill their obligations by keeping an accurate "running total" of how much GHG they are allowed to emit after adjustment. In this way, countries would have a convenient and reliable way to estimate compliance, simply by subtracting their respective inventory from the running total. In brief, Kyoto's cooperative instruments will likely impose a minimum eligibility requirement that participating Parties each have in place a mechanism can accurately adjust their assigned amounts to reflect the changes resulting from international exchange.

Individual Parties' submissions to the Secretariat and the Subsidiary bodies suggest that parties who participate in flexibility mechanisms will be required to establish national registries to track changes in assigned amounts and compliance with targets.

This record keeping or tracking system will probably have two fundamental characteristics: 1) it must be transparent and compatible with other national systems; and 2) it must permit an "audit trail," a device that can reconstruct previously recorded trades and thereby can verify all transactions from emissions trading and joint implementation. With these capacities helping track the changes in PAA and ERU ownership, the record keeping system will make resolving disputes easier by domestic and international bodies. Related to transparency, countries may need to develop systems to ensure full public disclosure of transactions. Finally, if non-state actors are allowed to participate in the trading system, it is the sovereign responsibility of each Party to authorize the participation of any "legal entities" (such as private sector entities) that buy, sell, or broker trading permits.