What is the Kyoto Protocol ?

It is the first legally binding treaty aimed at cutting emissions of the main greenhouse gases believed to contribute to global warming.

More than 150 nations signed it back in December 1997 at a meeting in Kyoto.

Under the terms of the protocol, industrialised nations have committed themselves to a range of targets to reduce emissions between 1990, the base year, and 2010. World targets range from an average 8 per cent cut for most of Europe to a maximum 10 per cent increase for Iceland and an 8 per cent increase for Australia.

The members of the European Union have agreed to share out their entitlement so that countries such as Ireland and Greece can increase their emissions while Britain, Germany and some others face tougher cuts.

Fiscal and tax policies :

Fiscal and tax policies will encourage the early introduction of new technologies. To achieve Kyoto objectives most of the countries which signed the protocol have already or will introduce "incentives" to promote renewable energies.

Incentives for investing in more cost-effective and energy-efficient technologies could maximize the opportunity of technology replacement. Taxing emissions or the carbon content of fuels can steer investments toward lower-emissions technologies.

Carbon Trading :

Countries that emit large amounts of greenhouse gases ought to make the biggest reductions. But, in terms of cost effectiveness, that may not be the best way forward.

Some countries can reduce their emissions much more cheaply than others. A country with lots of potential for wind power or other sources of renewable energy, for instance, might develop them on a large scale. They could reduce their emissions far more than required under Kyoto Protocol targets. Carbon trading will allow them to do this and then sell any spare rights to emit CO2 to a country with fewer of these options.

The Clean Development Mechanism :

This allows industrialised countries to claim credit for various activities in developing countries. It could become a major engine for getting clean energy technologies into poorer countries, solar cell systems, for example.