Carbon trading
It is a name given to the exchange of emission permits. This exchange of emissions may take place within the economy or may take the form of international transactions. Emission permit is known alternatively as carbon credit. Carbon credits are certificate awarded to the countries that are successful in reducing the emissions that caused global Warming. Carbon credits are measured units of certified emission reduction and each CER is equivalent to 1 metric ton of CO₂.
Methods/ Types of carbon trading
· Emission trading / Cap and Trade – when a country is able to reduce its emissions by more than the specified amount it can exchange some of its credit to another country who fails to reduce its emission level as per assigned amount. This kind of exchange of emission allowance is called emission trading.
· Offset trading – In this a country can invest in carbon projects abroad to earn carbon credit and thereby meet its reduction commitment. Offset trading is thus nothing but investment abroad in Carbon-project. According to Kyoto protocol if such a joint venture is between developed countries it is called joint implementation, while if it is taken along with any developing and poor country it is called clean development mechanism (CDM) .
Reducing GHG Emissions: Kyoto Mechanisms-
The UN’s Kyoto protocol established binding greenhouse gas emissions reduction targets for 37 industrialized countries and the European community. To help achieve these targets the protocol introduced three “flexible mechanisms”- international emissions trading (IET), joint implementation (JI), and the clean development Mechanism (CDM).
