 By Baker & McKenzie |
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The Protocol, which establishes legally binding greenhouse gas emission reduction targets for certain Parties, furthers certain key objectives of the United Nations Framework Convention on Climate Change, namely, attending to the principle of "common but differentiated" responsibilities among its members. One of the main goals of the Protocol is to lower the costs to reduce emissions and manage synergies with other environmental and social issues, while promoting sustainable development.
The principle of "common but differentiated" responsibility is reflected in the fact that different obligations are assigned to the Parties, following a criteria that developed countries, who have contributed more to the climate change phenomena with their greenhouse gas emissions (though some developing countries have also generated substantial emissions), should have more responsibilities with regard to the implementation of remedies.
Following the above, Parties to the Protocol are divided into Annex I and non-Annex I Parties. Annex I Parties are in their vast majority developed countries, which were members of the OECD by 1992 (Mexico was not a member until it became a party to the NAFTA), plus countries with economies in transition, such as the Russian Federation. Non Annex I Parties are mainly developing countries, some of which are highly vulnerable to the effects of global warming and do not have the resources to face the economic costs of implementing alternative measures to reduce greenhouse gas emissions. Under the Kyoto Protocol, Annex I Parties have emission reduction obligations whereas Non Annex I Parties do not - at least through 2012. Negotiations are supposed to begin this year on additional commitments beyond 2012 and imposing reduction obligations onto certain Non Annex I Parties will be a major issue in the negotiations.
A key feature of the Kyoto Protocol is the establishment of "flexible mechanisms" designed to reduce the overall cost of achieving emission reductions. The flexible mechanisms include the following:
A. The Clean Development Mechanism (CDM), which refers to projects that reduce emissions being implemented by Annex I Parties in non-Annex I countries, in return for "certified emission reductions" or "CERs";
B. Joint Implementation, which concerns emission reduction projects between Annex I parties that generate "emission reduction units" or "ERUs", and
C. Emissions trading, which is the transfer between Parties of CERs, ERUs and/or the "Assigned Amount Units" or "AAUs" initially allocated to the Parties with reduction obligations.
The CDM will encourage increased investment in sustainable development technologies into non Annex I countries, including Mexico. Because Annex I Parties can use the emission reductions achieved by projects funded in non Annex I countries, these Parties will evaluate such investment options as part of their compliance strategies. In many cases, achieving reductions in greenhouse gas emissions can be achieved at lower cost through investing in CDM projects rather than projects in the Annex I country, which will lead to increased investment into non Annex I countries, including Mexico.
Costs may vary from region to region, but the effect on the atmosphere is the same. That is why the Kyoto mechanisms open many doors for Annex I countries to invest in other nations such as Mexico, contributing not only to the reduction of greenhouse gas emissions, but also to the sustainable development of countries which require funding in order to achieve such goal.
CDM projects vary from electrification projects using solar energy, to methane recovering systems, using energy from unused sources such as solid organic waste. Other projects will attend to afforestation and reforestation activities, as long as they are human-induced.
On January 23, 2004, an Accord creating the Mexican Inter-Ministerial Committee for Emission-Reduction Projects and Greenhouse Gas Capture (the "Committee") was published in the Official Federal Gazette.
This Committee, which will have a permanent character, will be comprised of the following Ministries:
1. Environment and Natural Resources (SEMARNAT);
2. Energy;
3. Economy;
4. Agriculture, Farming, Rural Development, Fisheries and Nutrition;
5. Communications and Transportation.
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The Committee will act as Designated National Authority (DNA) for purposes of the Kyoto Protocol, and will have authority to issue letters of approval and keep a record of emission-reduction and greenhouse gas capture projects in Mexico. The Committee is in the process of issuing several letters of approval and the Mexican offices of Baker & McKenzie in Mexico has worked closely with the development of the first project that will receive the letter of approval for Greenhouse Gas sequestration.
Global Perspective
Recognizing the emergence of emissions reduction opportunities and the development of associated trading markets, Baker & McKenzie has assembled a specialized team of key experts from its Banking, Finance and Major Projects Practice Groups to address the implementation of national and international GHG emissions reduction requirements. This team combines expertise in environmental law, energy law, project finance, major projects, international trade, taxation and public international law and has already advised on related initiatives throughout the world.
As one of the largest generators of GHG emissions, the energy sector has traditionally been a strong target of regulatory GHG reform and will face some significant challenges in any carbon-constrained environment. Baker & McKenzie has a strong understanding of the energy sector, being advisors to a large number of energy companies and having worked at the cutting edge of international developments in GHG emissions trading. We continue to assist small renewable energy companies, "emerging renewable companies" and emerging green energy funds.
In addition to this experience, unlike most other law firms, Baker & McKenzie has participated in the international negotiations on climate change, advised numerous national governments, multilateral organizations, foreign exchanges and multinational corporations on issues related to climate change and other emissions trading schemes and has been intricately involved in a number of the early carbon trades and projects under the CDM and Joint Implementation mechanisms of the Kyoto Protocol. We currently have one of our lawyers on secondment to the World Bank's Prototype Carbon Fund.
Baker & McKenzie was the first law firm to recognize the importance of an international perspective and remains the only truly global law firm. Through its network of over 3,000 lawyers in 69 offices in 38 countries, the firm is able to offer an unparalleled service in countries leading the development of GHG reform.
Local Experience
Baker & McKenzie has been the law firm in Mexico responsible for the development of the first CDM project approved by the Mexican Inter-Ministerial Committee for Emission-Reduction Projects and Greenhouse Gas Capture, collaborating with our offices in other countries. Our environmental practice group is the only one in Mexico with experience both in the private and public sector for implementing CDM projects.
Through its six offices in Mexico, Baker & McKenzie has the capability of providing advice and support for the implementation of a CDM project, in such areas as corporate, tax, real estate, international trade and banking and finance. The CDM project requires the participation of experts in different areas of the law, which our practice group structure is uniquely positioned to offer. The Mexican offices of Baker & McKenzie are part of an international network with vast knowledge and experience in this subject that is capable of providing the support required by both national and foreign investors interested in developing CDM projects in Mexico.
| Should you require additional information in this regard, please feel free to contact any member of Baker & McKenzie´s Foreign Trade Practice Group. |
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