The supplementarity principle states that Annex I Parties to the Kyoto Protocol may only use CERs to meet part of their overall emissions target. A statement of the principle is found in Article 12(3) of the Kyoto Protocol:
Parties included in Annex I may use the certified emission reductions accruing from such [clean development mechanism] project activities to contribute to compliance with part of their quantified emission limitation and reduction commitments under Article 3, as determined by the Conference of the Parties serving as the meeting of the Parties to this Protocol (Kyoto Protocol, Article 12(3)(b)).
This principle is repeated in 15/CP.7:
The Conference of the Parties: ...
Affirming that the use of the mechanisms shall be supplemental to domestic action and that domestic action shall thus constitute a significant element of the effort made by each Party
included in Annex I to meet its quantified emission limitation and reduction commitments under Article 3, paragraph 1 (15/CP.7, preamble).
A similar principle is established in relation to international emissions trading. Article 17 of the Kyoto Protocol states:
The Parties included in Annex B may participate in emissions trading for the purposes of fulfilling their commitments under Article 3. Any such trading shall be supplemental to domestic actions for the purpose of meeting quantified emission limitation and reduction commitments under that Article (Kyoto Protocol, Article 17).
How many CERs may be used to meet a Party's target?
Exactly how many CERs can be used by an Annex I Party to meet their emission reduction target has never been quantified. However, the Conference of the Parties serving as the meeting of the Parties (COP/MOP) has clarified that domestic action in Annex I Parties must constitute a "significant element" of the effort made by those Parties:
...the use of the mechanisms [such as the clean development mechanism] shall be supplemental to domestic action and ... domestic action shall thus constitute a significant element of the effort made by each Party included in Annex I to meet its quantified emission limitation and reduction commitments under Article 3, paragraph 1 (2/CMP.1, paragraph 1).
If a Party has excess CERs at the end of the commitment period which have not been retired for compliance, it may carry a quantity of CERs over to the next commitment period equal to no more than 2.5% of its total assigned amount:
After expiration of the additional period for fulfilling commitments and where the final compilation and accounting report referred to in paragraph 62 below indicates that the quantity of ERUs, CERs, AAUs and/or RMUs retired by the Party in accordance with paragraph 13 above is at least equivalent to its anthropogenic carbon dioxide equivalent emissions of the greenhouse gases, and from the sources, listed in Annex A to the Kyoto Protocol for that commitment period, the Party may carry over to the subsequent commitment period:
- Any CERs held in its national registry, which have not been retired for that commitment period or cancelled, to a maximum of 2.5 per cent of the assigned amount pursuant to Article 3, paragraphs 7 and 8, of that Party (13/CMP.1, Annex, paragraph 15(b)).
In order to determine whether an Annex I Party's use of CDM is supplemental only to domestic action, certain reporting obligations are imposed.
Articles 5, 7 and 8 of the Kyoto Protocol require Parties to include information in their national communications on how use of the flexible mechanisms has been "supplemental" to domestic action.
The COP/MOP has reiterated that Annex I Parties must report on how their use of the CDM is supplemental to domestic action, and how domestic action constitutes a "significant element" of the effort made to meet their emissions target:
...the Parties included in Annex I [are requested] to provide relevant information in relation to paragraph 1 above, in accordance with Article 7 of the Kyoto Protocol, for review under its Article 8 (2/CMP.1, paragraph 1).