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Effects Of Kyoto Protocol Economics Essay

the United Nations Framework Convention on Climate Change is the apex body, under whose supervision Kyoto protocol was developed. It is an agreement between many countries, which signed it and committed for reduction in green house gas. The process started with negotiations between many countries in the early December of 1997 in Kyoto, Japan and with Russia’s ratification, it came in to force on the 16th February of 2005. The delay was because of Kyoto required at least 55 parties to ratify it and the total of those counties emissions to be at least 55% of global greenhouse gas emission.
Some of the highlights of the Kyoto protocol are:
A total of 191 states have signed and ratified the protocol as on September 2011
The United States of America has signed the protocol but has not ratified it.
Developed countries have binding target on emission reduction.
Developing countries do not have binding target for emission targets.
The protocol allows the member counties of “emissions trading” to meet their target.
Economic Impacts of the Protocol One of the key issues with the Protocol is its economic impact on member nations. Some critics emphasize that
Developed nations are the one who will be affected negatively most.
One of the major speculations is that developed nations who have ratified the treaty, will have to invest more in newer technologies and procedures to reduce their emissions.
It is also more obvious that developed countries need to incur more cost in enforcing stricter emission norms.
There is also possibility of an increase in the consumer price index because the companies will pass one the extra cost incurred in clean mechanism technology to consumer.
As the base year for fixing target is 1990, the countries, which have developed most after 1990, will suffer most and the countries that have slump after 1990 are at advantage. This effect can be evident on the fact that US has not ratified the treaty as it has grown considerably after 1990 and if it ratifies the treaty then it has to cut almost 30% emission costing around $100 per ton
The European union at large is at advantage because there was slump in western Europe and Russia after 1990. It is evident from the fact that it needs only $5 per ton for emission reduction target to be met.
The provisions of emission trading provided the developing countries a way to cash in on their reduced emission credits.
Kyoto Protocol in the context of India A Macroeconomic Overview The impact of kyoto protocol may be direct in case of developed countries but has it has indirect impact on developing countries The protocol does not make it binding on the developing countries to reduce their emission and it does not provide any reduction targets for them till. India coming under the scope of developing country has been affected by the indirect impact. The protocol has played a significant role in the reshaping overall Indian economy. The protocol has its effect on many macroeconomic parameters of India. If we take in to account the GDP of India, some of the major factors linked to kyoto protocol that have affected the GDP of India are
Investment Impact
Trade Impact
Flexibility Mechanisms Impact
Emissions Trading
Joint Implementation
Clean Development Mechanism
Fig-1 (Factors affecting the GDP of India in the context of Kyoto Protocol) We will be limiting our discussion to the impact of 2 major factors arising out of kyoto protocol that is investment and trade on the Indian GDP.
Investment

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