Carbon Markets

Carbon Markets

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CARBON MARKETS
An analysis of the dynamics of carbon trading

TABLE OF CONTENTS
Contents
Executive Summary
Carbon Trading The Kyoto Protocol was adopted in Kyoto, Japan, on 11 December 1997 and entered into force on 16 February 2005. 181 nations have ratified the treaty to date. These countries and their companies are the only ones allowed to engage in carbon trading. {text:bookmark-start} {text:bookmark-start} {text:bookmark-end} {text:bookmark-end} This protocol offers countries means of meeting their targets by way of three market-based mechanisms.
Clean Development Mechanism (CDM)
Joint Implementation (JI)
1.1 Emission Trading
A removal unit (RMU) on the basis of land use, land-use change and forestry (LULUCF) activities
An emission reduction unit (ERU) generated by a joint implementation project
A certified emission reduction (CER) generated from a clean development mechanism project
1.2 Clean Development Mechanism (CDM)
1.3 Joint Implementation (JI)
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*3.* Market Analysis
In emission reduction trading markets many different forms of trading have evolved. However, the underlying theme is to provide entities with the flexibility to determine the most economic means to reduce emissions. The diversity of trading markets is primarily a consequence of the products traded and the scope of the market. Examples include:
Bubbles allow an entity with multiple emissions sources to combine their total emissions under one accounting entity.
Credit-based Emission Reduction trading systems allow entities that wish to increase their emissions to obtain offsetting reductions from entities that are not required to reduce their emissions.
Cap and Trade Programs establish an aggregate cap on the emissions of a pollutant that is a firm and permanent limit for a...

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