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Carbon credits have recently been

available for purchase. Until now, I have only had a loose understanding of what

it meant to buy carbon credits. When booking a flight for myself and my

daughter, Expedia.ca offered the option of offsetting our carbon emmissions of

the plane ride by purchasing carbon credits. Because I am trying to have the

smallest carbon footprint that is conveniently possible (as are most people), I

opted in.

The Kyoto Protocol was initiated by the United Nations Framework Convention

on Climate Change and ratified (agreed to in principle) by 181 countries and the

European Union as a whole, individual entity in 1997, and was put into effect in

2005. This protocol was proposed by the international community to address and

reduce greenhouse gas emmissions that have led to global climate change.

Member countries are placed into different categories; Annex I countries make up

the industrialized nations. Annex II countries are developed countries that provide

financial support to the developing countries. The Annex II grouping consists of

countries that are members of the Organization for Economic Co-operation and

Development. The third and final category makes up the developing nations, who

have no limitations on greenhouse gas emissions as emissions are an essential

byproduct to building a stable economy and raising their citizens out of poverty.

Once these countries become developed they are then subject to the greenhouse

caps that Annex I and II countries currently have. Many countries are both Annex

I and II countries. The allowable emissions for member countries are between 6

and 8% less than their 1990 emission levels; meaning the limit is different for


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every member country; keeping in mind that developing nations are exempt from

emission caps and are inelligible to sell carbon credits. It is up to each individual

country to regulate their industrial outputs to meet the 1990 levels of emissions.

Although the Kyoto meeting was one of many meetings that took place in the

COPs (Conference of Parties), it is the most well known because it is the

conference that made countries legally liable for exceeding allowable greenhouse

emissions. The Kyoto Accord is the teeth in the United Nations Framework

Convention on Climate Change, and is therefore synonymous with raising global

awareness about climate change. Typically, companies who explore, produce and

promote alternate energy sources such as wind, solar and geothermal energy sell

carbon credits. Other organizations with available carbon credits include

companies that destroy carbon dioxide or other greenhouse gases directly. Carbon

dioxide sequestration is the process of converting CO2 gas into a solid form by

chemical or physical means. For example, carbon dioxide combined with quick

lime (calcium oxide) forms limestone that can be used in construction projects.

The Clean Development Mechanism is a governing set of rules set by the Kyoto

Protocol to determine which companies and projects can generate carbon credits.

This is necessary because anyone who sets up a company could promise that they

were developing/using/investing in alternative energy sources, start selling carbon

credits and make out like bandits while doing nothing to stop climate change. The

CDM is not the only regulatory body to certify carbon credits, but they are the

most well known. If you are purchasing a CDM certfied carbon credit, you know

that you are investing in a company that has been thoroughly investigated and

approved by the UN. The other carbon credit certification bodies include the

Chicago Climate Exchange, the Western Climate Initiative, and the Regional

Greenhouse Gas Initiative in the northeastern U.S. In addition, there are variousstandards bodies who set the carbon emission bar such as the Chicago Climate

Exchange, the Voluntary Carbon Standard and the CDM Gold Standard (based on

the Kyoto Protocol).


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Key to the establishment of carbon credit generation is the concept of

additionality. This principle is that a carbon credit isnt truly environmentally

beneficial unless the carbon credit producer would not have been able to reduce

emissions or invest in researching renewable energy sources without the money

given to them from carbon credits. This avoids giving money to organizations that

would be doing the exact same business regardless of income from carbon credits.

To summarize, the money your company earns from carbon credits must be put to

additional greenhouse gas reducing initiatives. Who makes the decision about

additionality? The CDM board has established a set of guidelnes by which they

certify a company for selling carbon credits.

Who Buys Carbon Credits?

Countries for one; in order to comply with allowable emissions should they

exceed their amount. For example, pretend that I am only allowed to produce 10

tonnes of carbon dioxide, but I produce 15 tonnes; I can buy 5 tonnes worth of

carbon credits to bring my effective emission level back down to 10 tonnes.

Individuals and companies can also buy carbon credits, such as in my flight

example. Certain eco friendly products also contribute part of the sale of theirgoods towards carbon credits, such as a $6 chocolate bar that I recently

purchased; every x amount of dollars = x tonnes of carbon dioxide or other

greenhouse gas. Typically, carbon credits sell between $1 and $30 per tonne.

Carbon Planet.com buys and sells carbon credits in three different incarnations.

First, you can buy a subscription that charges your credit card a monthly rate for a

certain amount of carbon credit. This rate can be established by them by looking

at the average emissions made by a single person in your country and calculatingan amount based on your age (how much carbon you have produced up until now

and in the future). You can buy a one time package to offset a specific carbon

expenditure such as a flight, or cross country drive, or you can pay for your entire

life; all the carbon you have and will produce based on the average emissions per
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person in your country of residence. I would like to point out, that this isnt an

endorsement of their products, nor am I affiliated with them in any way, but they

do provide a good description about the carbon credit currency.

the Clean Development Mechanism (CDM)

The CDM was established by Article 12 of the Protocol and refers to climate

change mitigation projects undertaken between Annex 1 countries and non-Annex

1 countries (see below). This new mechanism, whilst resembling JI, has important

points of difference. In particular, project investments must contribute to the

sustainable development of the non-Annex 1 host country, and must also be

independently certified. This latter requirement gives rise to the term "certified

emissions reductions" or CERs, which describe the output of CDM projects, andwhich under the terms of Article 12 can be banked from the year 2000, eight years

before the first commitment period (2008-2012).

THE CLEAN DEVELOPMENT MECHANISM

The CDM is one of the "flexibility mechanisms" that is defined in the

Kyoto Protocol. The flexibility mechanisms are designed to allow Annex Bcountries to meet their emission reduction commitments with reduced impact on

their economies (IPCC, 2007).The flexibility mechanisms were introduced to the

Kyoto Protocol by the US government. Developing countries were highly

skeptical and fiercely opposed to the flexibility mechanisms (Carbon Trust, 2009,

p. 6). However, in the international negotiations over the follow-up to the Kyoto

Protocol, it has been agreed that the mechanisms will continue.

The purpose of the CDM is to promote clean development in developing

countries, i.e., the "non-Annex I" countries (countries that aren't listed in Annex I

of the Framework Convention). The CDM is one of the Protocol's "project-based"

mechanisms, in that the CDM is designed to promote projects that reduce

emissions. The CDM is based on the idea of emission reduction "production"


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(Toth et al., 2001, p. 660).These reductions are "produced" and then subtracted

against a hypothetical "baseline" of emissions. The emissions baseline are the

emissions that are predicted to occur in the absence of a particular CDM project.

CDM projects are "credited" against this baseline, in the sense that developing

countries gain credit for producing these emission cuts.

The economic basis for including developing countries in efforts to reduce

emissions is that emission cuts are thought to be less expensive in developing

countries than developed countries (Goldemberg et al., 1996, p. 30; Grubb, 2003,

p. 159).For example, in developing countries, environmental regulation is

generally weaker than it is in developed countries (Sathaye et al., 2001, p. 387-

389).Thus, it is widely thought that there is greater potential for developingcountries to reduce their emissions than developed countries.

From the viewpoint of bringing about a global reduction in emissions, emissions

from developing countries are projected to increase substantially over this century

(Goldemberg et al., 1996, p. 29).[6] Infrastructure decisions made in developing

countries could therefore have a very large influence on future efforts to limit

total global emissions (Fisher et al., 2007).[8]The CDM is designed to start off

developing countries on a path towards less pollution, with industralized (AnnexB) countries paying for these reductions.

There were two main concerns about the CDM (Carbon Trust, 2009, pp. 1415).

One was over the additionality of emission reductions produced by the CDM (see

the section on additionality). The other was whether it would allow rich, northern

countries, and in particular, companies, to impose projects that were contrary to

the development interests of host countries. To alleviate this concern, the CDM

requires host countries to confirm that CDM projects contribute to their own

sustainable development. International rules also prohibit credits for some kind of

activities, notably from nuclear powerand avoided deforestation.
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To prevent industrialised countries from making unlimited use of CDM, the

framework has a provision that use of CDM be supplemental to domestic

actions to reduce emissions. This wording has led to a wide range of

interpretations - the Netherlands for example aims to achieve half of its required

emission reductions (from a BAU baseline) by CDM. [citation needed] It treats Dutch

companies' purchases of European Emissions Trading Scheme allowances from

companies in other countries as part of its domestic actions.

The CDM gained momentum in 2005 after the entry into force of the Kyoto

Protocol. Before the Protocol entered into force, investors considered this a key

risk factor. The initial years of operation yielded fewer CDM credits than

supporters had hoped for, as Parties did not provide sufficient funding to the EB.This left it understaffed.[citation needed]

The Adaptation Fund was established to finance concrete adaptation projects and

programmes in developing countries that are Parties to the Kyoto Protocol. [citation

needed] The Fund is to be financed with a share of proceeds from clean development

mechanism (CDM) project activities and receive funds from other sources.

DIFFICULTIES IN CDM

Carbon leakage

In theory, leakage may be reduced by crediting mechanisms (Burniaux et al.,

2009, p. 38). In practice, the amount of leakage partly depends on the definition of

the baseline against which credits are granted. The current CDM approach already

incorporates some leakage. Thus, reductions in leakage due to the CDM may, in

fact, be small or even non-existent.

Additionality, transaction costs and bottlenecks

In order to maintain the environmental effectiveness of the Kyoto Protocol,

emission savings from the CDM must be additional (World Bank, 2010, p. 265).[4]
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Without additionality, the CDM amounts to an income transfer to non-Annex I

countries (Burniaux et al., 2009, p. 40). Additionality is, however, difficult to

prove, and is the subject of vigorous debate.

Burniaux et al. (2009) commented on the large transaction costs of establishing

additionality. Assessing additionality has created delays (bottlenecks) in

approving CDM projects. According to World Bank (2010), there are significant

constraints to the continued growth of the CDM to support mitigation in

developing countries.

Incentives

The CDM rewards emissions reductions, but does not penalize emission increases

(Burniaux et al., 2009, p. 41). It therefore comes close to being an emissions

reduction subsidy. This can create a perverse incentive for firms to raise their

emissions in the short-term, with the aim of getting credits for reducing emissions

in the long-term.

Another difficulty is that the CDM might reduce the incentive for non-Annex I

countries to cap their emissions. This is because most developing countries

benefit more from a well-functioning crediting mechanism than from a world

emissions trading scheme (ETS), where their emissions are capped. This is true

except in cases where the allocation of emissions rights (i.e., the amount of

emissions that each country is allowed to emit) in the ETS is particularly

favourable to developing countries.

Combating global warming has broadly two components: decreasing the release

of greenhouse gases and sequestering greenhouse gases from the atmosphere.

Greenhouse gas emitters, such as coal-fired power plants, are known as

"sources", and places where carbon and other greenhouse gases, such as

methane, can be sequestered, i.e. kept out of the atmosphere, are known as

"sinks".
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The world's forests, particularly rain forests, are important carbon sinks, both

because of their uptake of CO2 through photosynthesis and because of the amount

of carbon stored in their woody biomass and the soil. When rain forests are

logged and burned, not only do we lose the forests' capacity to take up CO2 from

the atmosphere, but also the carbon stored in that biomass and soil is released into

the atmosphere through release of roots from the soil and the burning of the

woody plant matter.

An emerging proposal, Reduced Emissions from Avoided Deforestation and

Degradation (REDD), would allow rain forest preservation to qualify for CDM

project status. REDD has gained support through recent meetings of the COP, and

will be examined at Copenhagen.

One of the difficulties of the CDM is in judging whether or not projects truly

make additional savings in GHG emissions (Carbon Trust, 2009, p. 54-56).[2] The

baseline which is used in making this comparison is not observable. According to

the Carbon Trust (2009), some projects have been clearly additional: the fitting of

equipment to remove HFCs and N2O. Some low-carbon electricity supply projects

were also thought to have displaced coal-powered generation. Carbon Trust

(2009) reviewed some approved projects. In their view, some of these projects

had debatable points in their additionality assessments. They comparedestablishing additionality to the balance of evidence in a legal system. Certainty in

additionality is rare, and the higher the proof of additionality, the greater the risk

of rejecting good projects to reduce emissions.

[edit] Types
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Additionality is a much contested. There are many rival interpretations of

additionality:

1. What is often labelled environmental additionality has that a

project is additional if the emissions from the project are lower than the

baseline. It generally looks at what would have happened without the

project.

2. Another interpretation, sometimes termed project additionality,

the project must not have happened without the CDM.

A number of terms for different kinds of additionality have been discussed,

leading to some confusion, particularly over the terms 'financial additionality' and

'investment additionality' which are sometimes used as synonyms. 'Investment

additionality', however, was a concept discussed and ultimately rejected during

negotiation of the Marrakech Accords. Investment additionality carried the idea

that any project that surpasses a certain risk-adjusted profitability threshold would

automatically be deemed non-additional[16]. 'Financial additionality' is often

defined as an economically non-viable project becoming viable as a direct result

of CDM revenues.

Many investors argue that the environmental additionality interpretation would

make the CDM simpler. Environmental NGOs have argued that this interpretation

would open the CDM to free-riders, permitting developed countries to emit more

CO2e, while failing to produce emission reductions in the CDM host countries[17].

Schneider (2007) produced a report on the CDM for the WWF. [18]The findings of

the report were based on a systematic evaluation of 93 randomly chosen

registered CDM projects, as well as interviews and a literature survey (p. 5).According to Schneider (2007, p. 72), the additionality of a significant number of

projects over the 2004-2007 period seemed to be either unlikely or questionable.

It is never possible to establish with certainty what would have happened without

the CDM or in absence of a particular project, which is one common objection to
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the CDM. Nevertheless, official guidelines have been designed to facilitate

uniform assessment[19], set by the CDM Executive Board for assessing

additionality.

The risk of false credits

This section needs additional citations for verification.

Please help improve this article by adding reliable references. Unsourced material may be

challenged andremoved.(April 2010)

As the CDM is an alternative to domestic emission reductions, the perfectly

working CDM would produce no more and no less greenhouse gas emission

reductions than without use of the CDM. However, it was recognized from the

beginning that if projects that would have happened anyway are registered as

CDM projects, then the net effect is an increase of global emissions as those

"spurious" credits will be used to allow higher domestic emissions without

reducing emissions in the developing country hosting the CDM project. Spurious

credits may also occur because of overstated baselines. Such an inclusion is

termed a "false positive".[citation needed]

On the other hand, if a project is rejected because the criteria are set too high,there will be missed opportunities for emission reductions. Such a rejection is

termed a "false negative".[citation needed] For example, if it costs $75 to remove just

one tonne from a domestic power station in a developed country, while the same

money would reduce 37.5 tonnes of emissions through a genuinely additional and

sustainable CDM project in China, the project in China would be the more cost-

effective option. Some observers[who?] report that the CDM process is producing

far more of these false negatives than false positives.[citation needed]

By February 2009, there were 1202 projects with capacity of 41,881 MW (66%

from China) had applied for credits.[citation needed]

[edit] Industrial gas projects
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Some CERs are produced from CDM projects at refrigerant-producing factories in

non-Annex I countries that generate the powerful greenhouse gas HFC 23 as a by-

product. These projects dominated the CDM's early growth, and are expected to

generate 20% of all credited emission reductions by 2012 (Carbon Trust, 2009,

p. 60).[2] Paying for facilities to destroy HFC-23 can cost only 0.2-0.5 /tCO2.

Industrialized countries were, however, paying around 20 /tCO2 for reductions

that cost below 1 /tCO2. This provoked strong criticism.

The scale of profits generated by HFC-23 projects threatened distortions in

competitiveness with plants in industrialized countries that had already cleaned up

their emissions (p. 60). In an attempt to address concerns over HFC-23 projects,

the CDM Executive Board made changes in how these projects are credited.According to the Carbon Trust (2009, p. 60), these changes effectively ensure

that:

the potential to capture emissions from these plants is exploited;

distortions are reduced;

and the risk of perverse incentives is capped.

Critics of the CDM

[who?]

have stated that it would cost only 100 million to payproducers to capture and destroy HFC 23 compared with 4.6 billion in CDM

credits, yielding what they believe are excessive profits to the sellers and

middlemen [14][15][16].[citation needed] Carbon Trust (2009, p. 60) argued that

criticizing the CDM for finding low-cost reductions seemed perverse. They also

argued that addressing the problem with targeted funding was easy with hindsight,

and that before the CDM, these emission reduction opportunities were not taken.

Another argument in favour of the CDM[according to whom?] is that in a well-functioningmarket, rent[clarification needed] is shared between buyer and seller, not held exclusively

by one of the parties to a transaction.[citation needed]

[edit] Hydropower
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This section needs additional citations for verification.

Please help improve this article by adding reliable references. Unsourced material may be

challenged andremoved.(April 2010)

NGOs have criticized the inclusion of large hydropower projects, which they

consider unsustainable, as CDM projects.[citation needed] Lately, both the CDM EB and

investors have become concerned about such projects for potential lack of

additionality. One reason was that many of these projects had started well before

applying for CDM status. In June 2008, third party validator TV SD Group

rejected a hydropower project in China because the project proponents could not

document that they had seriously considered CDM at the time the project was

started. In July 2008, third party validators agreed that projects applying for CDM

status more than one year after having taken their investment decision should not

qualify for CDM status.

Hydropower projects larger than 20 MW must document that they follow World

Commission on Dams guidelines or similar guidelines in order to qualify for the

European Union's Emissions Trading Scheme.[citation needed] As of 21 July 2008,

CERs from hydropower projects are not listed on European carbon exchanges,

because different member states interpret these limitations differently

Carbon capture and storage

Negotiators have not yet been able to agree on whether, or how, carbon capture

and storage projects should be allowed under the CDM, although the technical

barriers to successfully implementing this technology delay the need for a

decision on this.[citation needed]

[edit] SuggestionsIn response to concerns of unsustainable projects or spurious

credits, the World Wide Fund for Nature and other NGOs devised a Gold

Standard methodology to certify projects that uses much stricter criteria than

required, such as allowing only renewable energy projects [25].
http://en.wikipedia.org/wiki/Wikipedia:Citing_sources#Inline_citationshttp://en.wikipedia.org/wiki/Wikipedia:Verifiabilityhttp://en.wikipedia.org/wiki/Wikipedia:Verifiabilityhttp://en.wikipedia.org/wiki/Wikipedia:Verifiabilityhttp://en.wikipedia.org/w/index.php?title=Clean_Development_Mechanism&action=edithttp://en.wikipedia.org/w/index.php?title=Clean_Development_Mechanism&action=edithttp://en.wikipedia.org/wiki/Wikipedia:Identifying_reliable_sourceshttp://en.wikipedia.org/wiki/Wikipedia:Identifying_reliable_sourceshttp://en.wikipedia.org/wiki/Template:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Verifiability#Burden_of_evidencehttp://en.wikipedia.org/wiki/Wikipedia:Verifiability#Burden_of_evidencehttp://en.wikipedia.org/wiki/Wikipedia:Verifiability#Burden_of_evidencehttp://en.wikipedia.org/wiki/Hydropowerhttp://en.wikipedia.org/wiki/Hydropowerhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/World_Commission_on_Damshttp://en.wikipedia.org/wiki/World_Commission_on_Damshttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/w/index.php?title=Clean_Development_Mechanism&action=edit&section=28http://en.wikipedia.org/wiki/World_Wide_Fund_for_Naturehttp://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_note-24http://en.wikipedia.org/wiki/File:Question_book-new.svghttp://en.wikipedia.org/wiki/Wikipedia:Citing_sources#Inline_citationshttp://en.wikipedia.org/wiki/Wikipedia:Verifiabilityhttp://en.wikipedia.org/w/index.php?title=Clean_Development_Mechanism&action=edithttp://en.wikipedia.org/wiki/Wikipedia:Identifying_reliable_sourceshttp://en.wikipedia.org/wiki/Template:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Verifiability#Burden_of_evidencehttp://en.wikipedia.org/wiki/Hydropowerhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/World_Commission_on_Damshttp://en.wikipedia.org/wiki/World_Commission_on_Damshttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/w/index.php?title=Clean_Development_Mechanism&action=edit&section=28http://en.wikipedia.org/wiki/World_Wide_Fund_for_Naturehttp://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_note-24


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For example, a South African brick kiln was faced with a business decision;

replace its depleted energy supply with coal from a new mine, or build a difficult

but cleaner natural gas pipeline to another country. They chose to build the

pipeline with SASOL. SASOL claimed the difference in GHG emissions as a

CDM credit, comparing emissions from the pipeline to the contemplated coal

mine. During its approval process, the validators noted that changing the supply

from coal to gas met the CDM's 'additionality' criteria and was the least cost-

effective option[26]. However, there were unofficial reports that the fuel change

was going to take place anyway, although this was later denied by the company's

press office[27].

[edit] Successes

Schneider (2007, p. 73) commented on the success of the CDM in reducing

emissions from industrial plants and landfills.[18] Schneider (2007) concluded by

stating that if concerns over the CDM are properly addressed, it would continue to

be an "important instrument in the fight against climate change."

[edit] See also

Obtaining ownership of land by productive use

No-lose target

Climate, Community & Biodiversity Alliance

China Carbon Forum (CCF)

[edit] Notes

1. ^ a b IPCC (2007). "Glossary J-P. In (book section): Annex I. In:

Climate Change 2007: MReport of the Intergovernmental Panel on

Climate Change (B. Metz et al. Eds.)". Cambridge University Press,

Cambridge, U.K., and New York, N.Y., U.S.A..
http://en.wikipedia.org/wiki/South_Africahttp://en.wikipedia.org/wiki/Coal_minehttp://en.wikipedia.org/wiki/Natural_gashttp://en.wikipedia.org/wiki/Natural_gashttp://en.wikipedia.org/wiki/Sasolhttp://en.wikipedia.org/wiki/Sasolhttp://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_note-25http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_note-25http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_note-26http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_note-26http://en.wikipedia.org/w/index.php?title=Clean_Development_Mechanism&action=edit&section=29http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_note-schneider-17http://en.wikipedia.org/w/index.php?title=Clean_Development_Mechanism&action=edit&section=30http://en.wikipedia.org/wiki/Land_tenure#Modes_of_ownership_and_tenurehttp://en.wikipedia.org/w/index.php?title=No-lose_target&action=edit&redlink=1http://en.wikipedia.org/wiki/Climate,_Community_%26_Biodiversity_Alliancehttp://en.wikipedia.org/wiki/China_Carbon_Forumhttp://en.wikipedia.org/w/index.php?title=Clean_Development_Mechanism&action=edit&section=31http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-glossary_0-0http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-glossary_0-1http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-glossary_0-1http://www.ipcc.ch/publications_and_data/ar4/wg3/en/annex1sglossary-j-p.htmlhttp://www.ipcc.ch/publications_and_data/ar4/wg3/en/annex1sglossary-j-p.htmlhttp://www.ipcc.ch/publications_and_data/ar4/wg3/en/annex1sglossary-j-p.htmlhttp://www.ipcc.ch/publications_and_data/ar4/wg3/en/annex1sglossary-j-p.htmlhttp://www.ipcc.ch/publications_and_data/ar4/wg3/en/annex1sglossary-j-p.htmlhttp://en.wikipedia.org/wiki/South_Africahttp://en.wikipedia.org/wiki/Coal_minehttp://en.wikipedia.org/wiki/Natural_gashttp://en.wikipedia.org/wiki/Sasolhttp://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_note-25http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_note-26http://en.wikipedia.org/w/index.php?title=Clean_Development_Mechanism&action=edit&section=29http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_note-schneider-17http://en.wikipedia.org/w/index.php?title=Clean_Development_Mechanism&action=edit&section=30http://en.wikipedia.org/wiki/Land_tenure#Modes_of_ownership_and_tenurehttp://en.wikipedia.org/w/index.php?title=No-lose_target&action=edit&redlink=1http://en.wikipedia.org/wiki/Climate,_Community_%26_Biodiversity_Alliancehttp://en.wikipedia.org/wiki/China_Carbon_Forumhttp://en.wikipedia.org/w/index.php?title=Clean_Development_Mechanism&action=edit&section=31http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-glossary_0-0http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-glossary_0-1http://www.ipcc.ch/publications_and_data/ar4/wg3/en/annex1sglossary-j-p.htmlhttp://www.ipcc.ch/publications_and_data/ar4/wg3/en/annex1sglossary-j-p.htmlhttp://www.ipcc.ch/publications_and_data/ar4/wg3/en/annex1sglossary-j-p.html


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http://www.ipcc.ch/publications_and_data/ar4/wg3/en/annex1sglossary-j-

p.html. Retrieved 2010-04-23.

2. ^ abcde Carbon Trust (March 2009). "Global Carbon Mechanisms:

Emerging lessons and implications (CTC748)". Carbon Trust website.

http://www.carbontrust.co.uk/Publications/pages/publicationdetail.aspx?

id=CTC748&respos=2&q=global+carbon+market&o=Rank&od=asc&pn

=0&ps=10. Retrieved 2010-03-31.

3. ^ a b Grubb, M. (July-September 2003). "The Economics of the

Kyoto Protocol". World Economics 4 (3): 143189.

http://www.econ.cam.ac.uk/rstaff/grubb/publications/J36.pdf. Retrieved

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4. ^ a b c d e World Bank (2010). "World Development Report 2010:

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Washington DC 20433. http://go.worldbank.org/BKLQ9DSDU0.

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5. ^ Toth, F.L. et al. (2001). "Decision-making Frameworks. In:

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6. ^ a b Goldemberg, J. et al. (1996). Introduction: scope of the

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ISBN9780521568548.
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8. ^ Fisher, B.S. et al. (2007). "3.1.3 Development trends and the

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Change Mitigation: How to Build the Necessary Global Action in a Cost-

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OECD website. http://appli1.oecd.org/olis/2009doc.nsf/linkto/eco-wkp

%282009%2942. Retrieved 2010-04-24.

11. ^ Barker, T. et al. (2007). "11.7.2 Carbon leakage. In (book

chapter): Mitigation from a cross-sectoral perspective. In (book): Climate

Change 2007: Mitigation. Contribution of Working Group III to the

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14. ^ "Delhi Metro is first rail project to earn carbon credits". The

Economic Times. 2008-01-05.

http://economictimes.indiatimes.com/news/news-by-

industry/transportation/railways/Delhi-Metro-is-first-rail-project-to-earn-

carbon-credits/articleshow/2676012.cms. Retrieved 2010-02-02.

15. ^ ab World Bank (n.d.). "The World Banks 10 years of experience

in carbon finance: Insights from working with carbon markets for

development & global greenhouse gas mitigation (brochure)". Carbon

finance on the World Bank website. http://go.worldbank.org/I18PR3E700.


16. ^ VROM (Netherlands Ministry of Housing, Spacial Planning and

the Environment

17. ^ Failed Mechanism: Hundreds of Hydros Expose Serious Flaws

in the CDM; International Rivers; December 2, 2007

18. ^ a b Schneider, L. (5 November 2007). "Is the CDM fulfilling its

environmental and sustainable development objectives? An evaluation of

the CDM and options for improvement". WWF website.

http://www.panda.org/what_we_do/footprint/climate_carbon_energy/ener

gy_solutions/resources/?118000/An-evaluation-of-the-CDM-and-options-

for-improvement. Retrieved 2010-04-20.
http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-11http://siteresources.worldbank.org/INTCARBONFINANCE/Resources/State_and_Trends_of_the_Carbon_Market_2010_low_res.pdfhttp://siteresources.worldbank.org/INTCARBONFINANCE/Resources/State_and_Trends_of_the_Carbon_Market_2010_low_res.pdfhttp://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-12http://www.ipcc.ch/publications_and_data/ar4/wg3/en/ch13s13-3-3-4.htmlhttp://www.ipcc.ch/publications_and_data/ar4/wg3/en/ch13s13-3-3-4.htmlhttp://www.ipcc.ch/publications_and_data/ar4/wg3/en/ch13s13-3-3-4.htmlhttp://www.ipcc.ch/publications_and_data/ar4/wg3/en/ch13s13-3-3-4.htmlhttp://www.ipcc.ch/publications_and_data/ar4/wg3/en/ch13s13-3-3-4.htmlhttp://www.ipcc.ch/publications_and_data/ar4/wg3/en/ch13s13-3-3-4.htmlhttp://www.ipcc.ch/publications_and_data/ar4/wg3/en/ch13s13-3-3-4.htmlhttp://www.ipcc.ch/publications_and_data/ar4/wg3/en/ch13s13-3-3-4.htmlhttp://www.ipcc.ch/publications_and_data/ar4/wg3/en/ch13s13-3-3-4.htmlhttp://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-13http://economictimes.indiatimes.com/news/news-by-industry/transportation/railways/Delhi-Metro-is-first-rail-project-to-earn-carbon-credits/articleshow/2676012.cmshttp://economictimes.indiatimes.com/news/news-by-industry/transportation/railways/Delhi-Metro-is-first-rail-project-to-earn-carbon-credits/articleshow/2676012.cmshttp://economictimes.indiatimes.com/news/news-by-industry/transportation/railways/Delhi-Metro-is-first-rail-project-to-earn-carbon-credits/articleshow/2676012.cmshttp://economictimes.indiatimes.com/news/news-by-industry/transportation/railways/Delhi-Metro-is-first-rail-project-to-earn-carbon-credits/articleshow/2676012.cmshttp://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-wbnd_14-0http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-wbnd_14-1http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-wbnd_14-1http://go.worldbank.org/I18PR3E700http://go.worldbank.org/I18PR3E700http://go.worldbank.org/I18PR3E700http://go.worldbank.org/I18PR3E700http://go.worldbank.org/I18PR3E700http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-15http://www.vrom.nl/pagina.html?id=37532http://www.vrom.nl/pagina.html?id=37532http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-16http://www.internationalrivers.org/node/2326http://www.internationalrivers.org/node/2326http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-schneider_17-0http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-schneider_17-0http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-schneider_17-1http://www.panda.org/what_we_do/footprint/climate_carbon_energy/energy_solutions/resources/?118000/An-evaluation-of-the-CDM-and-options-for-improvementhttp://www.panda.org/what_we_do/footprint/climate_carbon_energy/energy_solutions/resources/?118000/An-evaluation-of-the-CDM-and-options-for-improvementhttp://www.panda.org/what_we_do/footprint/climate_carbon_energy/energy_solutions/resources/?118000/An-evaluation-of-the-CDM-and-options-for-improvementhttp://www.panda.org/what_we_do/footprint/climate_carbon_energy/energy_solutions/resources/?118000/An-evaluation-of-the-CDM-and-options-for-improvementhttp://www.panda.org/what_we_do/footprint/climate_carbon_energy/energy_solutions/resources/?118000/An-evaluation-of-the-CDM-and-options-for-improvementhttp://www.panda.org/what_we_do/footprint/climate_carbon_energy/energy_solutions/resources/?118000/An-evaluation-of-the-CDM-and-options-for-improvementhttp://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-11http://siteresources.worldbank.org/INTCARBONFINANCE/Resources/State_and_Trends_of_the_Carbon_Market_2010_low_res.pdfhttp://siteresources.worldbank.org/INTCARBONFINANCE/Resources/State_and_Trends_of_the_Carbon_Market_2010_low_res.pdfhttp://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-12http://www.ipcc.ch/publications_and_data/ar4/wg3/en/ch13s13-3-3-4.htmlhttp://www.ipcc.ch/publications_and_data/ar4/wg3/en/ch13s13-3-3-4.htmlhttp://www.ipcc.ch/publications_and_data/ar4/wg3/en/ch13s13-3-3-4.htmlhttp://www.ipcc.ch/publications_and_data/ar4/wg3/en/ch13s13-3-3-4.htmlhttp://www.ipcc.ch/publications_and_data/ar4/wg3/en/ch13s13-3-3-4.htmlhttp://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-13http://economictimes.indiatimes.com/news/news-by-industry/transportation/railways/Delhi-Metro-is-first-rail-project-to-earn-carbon-credits/articleshow/2676012.cmshttp://economictimes.indiatimes.com/news/news-by-industry/transportation/railways/Delhi-Metro-is-first-rail-project-to-earn-carbon-credits/articleshow/2676012.cmshttp://economictimes.indiatimes.com/news/news-by-industry/transportation/railways/Delhi-Metro-is-first-rail-project-to-earn-carbon-credits/articleshow/2676012.cmshttp://economictimes.indiatimes.com/news/news-by-industry/transportation/railways/Delhi-Metro-is-first-rail-project-to-earn-carbon-credits/articleshow/2676012.cmshttp://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-wbnd_14-0http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-wbnd_14-1http://go.worldbank.org/I18PR3E700http://go.worldbank.org/I18PR3E700http://go.worldbank.org/I18PR3E700http://go.worldbank.org/I18PR3E700http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-15http://www.vrom.nl/pagina.html?id=37532http://www.vrom.nl/pagina.html?id=37532http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-16http://www.internationalrivers.org/node/2326http://www.internationalrivers.org/node/2326http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-schneider_17-0http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-schneider_17-1http://www.panda.org/what_we_do/footprint/climate_carbon_energy/energy_solutions/resources/?118000/An-evaluation-of-the-CDM-and-options-for-improvementhttp://www.panda.org/what_we_do/footprint/climate_carbon_energy/energy_solutions/resources/?118000/An-evaluation-of-the-CDM-and-options-for-improvementhttp://www.panda.org/what_we_do/footprint/climate_carbon_energy/energy_solutions/resources/?118000/An-evaluation-of-the-CDM-and-options-for-improvementhttp://www.panda.org/what_we_do/footprint/climate_carbon_energy/energy_solutions/resources/?118000/An-evaluation-of-the-CDM-and-options-for-improvementhttp://www.panda.org/what_we_do/footprint/climate_carbon_energy/energy_solutions/resources/?118000/An-evaluation-of-the-CDM-and-options-for-improvementhttp://www.panda.org/what_we_do/footprint/climate_carbon_energy/energy_solutions/resources/?118000/An-evaluation-of-the-CDM-and-options-for-improvement


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19. ^ Tool for the demonstration and assessment of additionality

(Version 03), UNFCCC CDM EB, EB 29

20. ^ Mller, B. (March 2009). "Additionality in the Clean

Development Mechanism: Why and What?". Dr. Benito Mller's web

page on the Oxford Institute for Energy Studies website.

http://www.oxfordenergy.org/muller.php. Retrieved 2010-04-20.

21. ^ A New Initiative to Use Carbon Trading for Tropical Forest

Conservation] William F. Laurance(2007), Biotropica 39 (1), 2024

22. ^ Stern, N. 2006. Stern Review of the Economics of Climate

Change

23. ^ Forests First in the Fight Against Climate Change, Global

Canopy Programme, 2007

24. ^ World Bank, State and Trends of the Carbon Market, 2010

25. ^ CDM Gold Standard

26. ^ CDM Project 0177 Lawley Fuel Switch Project UNFCCC

27. ^ Carbon trade watch

[edit] Further reading

Boyd, E. et al (October 2007). "The Clean Development

Mechanism: An assessment of current practice and future approaches for

policy". Tyndall Centre for Climate Change Research.

http://www.tyndall.ac.uk/publications/working_papers/twp114_summary.s

html. Retrieved 2009-08-08.[dead link]

Hepburn, C. (November 2007). "Carbon Trading: A Review of the

Kyoto Mechanisms". Annual Review of Environment and Resources 32:

375393. doi:10.1146/annurev.energy.32.053006.141203.

http://arjournals.annualreviews.org/eprint/V5uDHeDwvfmeMnr3IuPZ/full

/10.1146/annurev.energy.32.053006.141203. Retrieved 2009-05-20.

[edit] External links
http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-18http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-19http://www.oxfordenergy.org/muller.phphttp://www.oxfordenergy.org/muller.phphttp://www.oxfordenergy.org/muller.phphttp://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-20http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-21http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-22http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-23http://siteresources.worldbank.org/NEWS/Resources/State&Trendsformatted06May10pm.pdfhttp://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-24http://www.cdmgoldstandard.org/http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-25http://cdm.unfccc.int/UserManagement/FileStorage/S790NBBTEMPHOKU95G4UB8J0U5V52Ohttp://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-26http://www.carbontradewatch.org/index.php?option=com_content&Itemid=36&id=177&task=viewhttp://en.wikipedia.org/w/index.php?title=Clean_Development_Mechanism&action=edit&section=32http://www.tyndall.ac.uk/publications/working_papers/twp114_summary.shtmlhttp://www.tyndall.ac.uk/publications/working_papers/twp114_summary.shtmlhttp://www.tyndall.ac.uk/publications/working_papers/twp114_summary.shtmlhttp://en.wikipedia.org/wiki/Tyndall_Centre_for_Climate_Change_Researchhttp://en.wikipedia.org/wiki/Tyndall_Centre_for_Climate_Change_Researchhttp://www.tyndall.ac.uk/publications/working_papers/twp114_summary.shtmlhttp://www.tyndall.ac.uk/publications/working_papers/twp114_summary.shtmlhttp://en.wikipedia.org/wiki/Wikipedia:Link_rothttp://en.wikipedia.org/wiki/Wikipedia:Link_rothttp://arjournals.annualreviews.org/eprint/V5uDHeDwvfmeMnr3IuPZ/full/10.1146/annurev.energy.32.053006.141203http://arjournals.annualreviews.org/eprint/V5uDHeDwvfmeMnr3IuPZ/full/10.1146/annurev.energy.32.053006.141203http://arjournals.annualreviews.org/eprint/V5uDHeDwvfmeMnr3IuPZ/full/10.1146/annurev.energy.32.053006.141203http://en.wikipedia.org/wiki/Digital_object_identifierhttp://dx.doi.org/10.1146%2Fannurev.energy.32.053006.141203http://arjournals.annualreviews.org/eprint/V5uDHeDwvfmeMnr3IuPZ/full/10.1146/annurev.energy.32.053006.141203http://arjournals.annualreviews.org/eprint/V5uDHeDwvfmeMnr3IuPZ/full/10.1146/annurev.energy.32.053006.141203http://en.wikipedia.org/w/index.php?title=Clean_Development_Mechanism&action=edit&section=33http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-18http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-19http://www.oxfordenergy.org/muller.phphttp://www.oxfordenergy.org/muller.phphttp://www.oxfordenergy.org/muller.phphttp://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-20http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-21http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-22http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-23http://siteresources.worldbank.org/NEWS/Resources/State&Trendsformatted06May10pm.pdfhttp://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-24http://www.cdmgoldstandard.org/http://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-25http://cdm.unfccc.int/UserManagement/FileStorage/S790NBBTEMPHOKU95G4UB8J0U5V52Ohttp://en.wikipedia.org/wiki/Clean_Development_Mechanism#cite_ref-26http://www.carbontradewatch.org/index.php?option=com_content&Itemid=36&id=177&task=viewhttp://en.wikipedia.org/w/index.php?title=Clean_Development_Mechanism&action=edit&section=32http://www.tyndall.ac.uk/publications/working_papers/twp114_summary.shtmlhttp://www.tyndall.ac.uk/publications/working_papers/twp114_summary.shtmlhttp://www.tyndall.ac.uk/publications/working_papers/twp114_summary.shtmlhttp://en.wikipedia.org/wiki/Tyndall_Centre_for_Climate_Change_Researchhttp://www.tyndall.ac.uk/publications/working_papers/twp114_summary.shtmlhttp://www.tyndall.ac.uk/publications/working_papers/twp114_summary.shtmlhttp://en.wikipedia.org/wiki/Wikipedia:Link_rothttp://arjournals.annualreviews.org/eprint/V5uDHeDwvfmeMnr3IuPZ/full/10.1146/annurev.energy.32.053006.141203http://arjournals.annualreviews.org/eprint/V5uDHeDwvfmeMnr3IuPZ/full/10.1146/annurev.energy.32.053006.141203http://en.wikipedia.org/wiki/Digital_object_identifierhttp://dx.doi.org/10.1146%2Fannurev.energy.32.053006.141203http://arjournals.annualreviews.org/eprint/V5uDHeDwvfmeMnr3IuPZ/full/10.1146/annurev.energy.32.053006.141203http://arjournals.annualreviews.org/eprint/V5uDHeDwvfmeMnr3IuPZ/full/10.1146/annurev.energy.32.053006.141203http://en.wikipedia.org/w/index.php?title=Clean_Development_Mechanism&action=edit&section=33


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Home page of United Nations website on Clean Development

Mechanisms

Spreadsheet of Hydro Projects in the CDM Project Pipeline,

International Rivers

Carbon-Scout Research Group focusing on CDM/JI project

assessment

Clean Development Mechanism projects in & around India

Institute for Global Environment Strategies

Designated National Authority of India for CDM Projects
http://cdm.unfccc.int/index.htmlhttp://cdm.unfccc.int/index.htmlhttp://cdm.unfccc.int/index.htmlhttp://www.internationalrivers.org/node/1785http://www.internationalrivers.org/node/1785http://www.internationalrivers.org/node/1785http://www.carbon-scout.com/http://www.indscanblog.com/http://www.iges.or.jp/en/http://cdmindia.nic.in/http://cdm.unfccc.int/index.htmlhttp://cdm.unfccc.int/index.htmlhttp://www.internationalrivers.org/node/1785http://www.internationalrivers.org/node/1785http://www.carbon-scout.com/http://www.indscanblog.com/http://www.iges.or.jp/en/http://cdmindia.nic.in/


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A carbon credit is a generic term for any tradable certificate or permitrepresenting the right to emit one tonne of carbon or carbon dioxide equivalent

(CO2-e).[1][2][3]

Carbon credits and carbon markets are a component of national and international

attempts to mitigate the growth in concentrations ofgreenhouse gases (GHGs).

One carbon credit is equal to one ton of carbon dioxide, or in some markets,

carbon dioxide equivalent gases. Carbon trading is an application of an emissions

trading approach. Greenhouse gas emissions are capped and then markets are used

to allocate the emissions among the group of regulated sources. The goal is to

allow market mechanisms to drive industrial and commercial processes in the

direction of low emissions or less carbon intensive approaches than those used

when there is no cost to emitting carbon dioxide and other GHGs into the

atmosphere. Since GHG mitigation projects generate credits, this approach can be

used to finance carbon reduction schemes between trading partners and around

the world.

There are also many companies that sell carbon credits to commercial and

individual customers who are interested in lowering their carbon footprint on a

voluntary basis. These carbon offsetters purchase the credits from an investment

fund or a carbon development company that has aggregated the credits from
http://en.wikipedia.org/wiki/Carbon_credit#cite_note-ced-0http://en.wikipedia.org/wiki/Carbon_credit#cite_note-epav-1http://en.wikipedia.org/wiki/Carbon_credit#cite_note-id-2http://en.wikipedia.org/wiki/Greenhouse_gashttp://en.wikipedia.org/wiki/Greenhouse_gashttp://en.wikipedia.org/wiki/Emissions_tradinghttp://en.wikipedia.org/wiki/Emissions_tradinghttp://en.wikipedia.org/wiki/Marketshttp://en.wikipedia.org/wiki/Carbon_dioxidehttp://en.wikipedia.org/wiki/Carbon_dioxidehttp://en.wikipedia.org/wiki/Carbon_projecthttp://en.wikipedia.org/wiki/Carbon_footprinthttp://en.wikipedia.org/wiki/Carbon_offsethttp://en.wikipedia.org/wiki/Carbon_credit#cite_note-ced-0http://en.wikipedia.org/wiki/Carbon_credit#cite_note-epav-1http://en.wikipedia.org/wiki/Carbon_credit#cite_note-id-2http://en.wikipedia.org/wiki/Greenhouse_gashttp://en.wikipedia.org/wiki/Emissions_tradinghttp://en.wikipedia.org/wiki/Emissions_tradinghttp://en.wikipedia.org/wiki/Marketshttp://en.wikipedia.org/wiki/Carbon_dioxidehttp://en.wikipedia.org/wiki/Carbon_projecthttp://en.wikipedia.org/wiki/Carbon_footprinthttp://en.wikipedia.org/wiki/Carbon_offset


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individual projects. The quality of the credits is based in part on the validation

process and sophistication of the fund or development company that acted as the

sponsor to the carbon project. This is reflected in their price; voluntary units

typically have less value than the units sold through the rigorously validated

Clean Development Mechanism.[4]

Contents

[hide]

1 Definitions

2 Background

o 2.1 Emission allowances

o 2.2 Kyoto's 'Flexible mechanisms'

o 2.3 Emission markets

o 2.4 Setting a market price for carbon

3 How buying carbon credits can reduce emissions

o 3.1 Credits versus taxes

4 Creating real carbon credits

o 4.1 Additionality and its importance

o 4.2 Criticisms

5 See also

6 References

7 External links

[edit] Definitions

The Collins English Dictionary defines a carbon credit as a certificate showing

that a government or company has paid to have a certain amount of carbon

dioxide removed from the environment.[1]
http://en.wikipedia.org/wiki/Carbon_projecthttp://en.wikipedia.org/wiki/Clean_Development_Mechanismhttp://en.wikipedia.org/wiki/Carbon_credit#cite_note-3http://en.wikipedia.org/wiki/Carbon_credit#cite_note-3http://en.wikipedia.org/wiki/Carbon_credithttp://en.wikipedia.org/wiki/Carbon_credit#Definitionshttp://en.wikipedia.org/wiki/Carbon_credit#Backgroundhttp://en.wikipedia.org/wiki/Carbon_credit#Emission_allowanceshttp://en.wikipedia.org/wiki/Carbon_credit#Kyoto.27s_.27Flexible_mechanisms.27http://en.wikipedia.org/wiki/Carbon_credit#Kyoto.27s_.27Flexible_mechanisms.27http://en.wikipedia.org/wiki/Carbon_credit#Emission_marketshttp://en.wikipedia.org/wiki/Carbon_credit#Setting_a_market_price_for_carbonhttp://en.wikipedia.org/wiki/Carbon_credit#How_buying_carbon_credits_can_reduce_emissionshttp://en.wikipedia.org/wiki/Carbon_credit#Credits_versus_taxeshttp://en.wikipedia.org/wiki/Carbon_credit#Creating_real_carbon_creditshttp://en.wikipedia.org/wiki/Carbon_credit#Additionality_and_its_importancehttp://en.wikipedia.org/wiki/Carbon_credit#Criticismshttp://en.wikipedia.org/wiki/Carbon_credit#See_alsohttp://en.wikipedia.org/wiki/Carbon_credit#Referenceshttp://en.wikipedia.org/wiki/Carbon_credit#External_linkshttp://en.wikipedia.org/w/index.php?title=Carbon_credit&action=edit&section=1http://en.wikipedia.org/wiki/Carbon_credit#cite_note-ced-0http://en.wikipedia.org/wiki/Carbon_projecthttp://en.wikipedia.org/wiki/Clean_Development_Mechanismhttp://en.wikipedia.org/wiki/Carbon_credit#cite_note-3http://en.wikipedia.org/wiki/Carbon_credithttp://en.wikipedia.org/wiki/Carbon_credit#Definitionshttp://en.wikipedia.org/wiki/Carbon_credit#Backgroundhttp://en.wikipedia.org/wiki/Carbon_credit#Emission_allowanceshttp://en.wikipedia.org/wiki/Carbon_credit#Kyoto.27s_.27Flexible_mechanisms.27http://en.wikipedia.org/wiki/Carbon_credit#Emission_marketshttp://en.wikipedia.org/wiki/Carbon_credit#Setting_a_market_price_for_carbonhttp://en.wikipedia.org/wiki/Carbon_credit#How_buying_carbon_credits_can_reduce_emissionshttp://en.wikipedia.org/wiki/Carbon_credit#Credits_versus_taxeshttp://en.wikipedia.org/wiki/Carbon_credit#Creating_real_carbon_creditshttp://en.wikipedia.org/wiki/Carbon_credit#Additionality_and_its_importancehttp://en.wikipedia.org/wiki/Carbon_credit#Criticismshttp://en.wikipedia.org/wiki/Carbon_credit#See_alsohttp://en.wikipedia.org/wiki/Carbon_credit#Referenceshttp://en.wikipedia.org/wiki/Carbon_credit#External_linkshttp://en.wikipedia.org/w/index.php?title=Carbon_credit&action=edit&section=1http://en.wikipedia.org/wiki/Carbon_credit#cite_note-ced-0


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The Environment Protection Authority of Victoria defines a carbon credit as a

generic term to assign a value to a reduction or offset of greenhouse gas

emissions.. usually equivalent to one tonne of carbon dioxide equivalent (CO2-

e).[2]

The Investopedia Inc investment dictionary defines a carbon credit as a permit

that allows the holder to emit one ton of carbon dioxide..which can be traded in

the international market at their current market price.[3]

[edit] Background

Burning of fossil fuels is a major source of industrial greenhouse gas emissions,

especially for power, cement, steel, textile, fertilizer and many other industries

which rely on fossil fuels (coal, electricity derived from coal, natural gas and oil).

The major greenhouse gases emitted by these industries are carbon dioxide,

methane, nitrous oxide, hydrofluorocarbons (HFCs), etc., all of which increase the

atmosphere's ability to trap infrared energy and thus affect the climate.

The concept of carbon credits came into existence as a result of increasing

awareness of the need for controlling emissions. The IPCC (IntergovernmentalPanel on Climate Change) has observed[5] that:

Policies that provide a real or implicit price of carbon could

create incentives for producers and consumers to significantly

invest in low-GHG products, technologies and processes. Such

policies could include economic instruments, government funding

and regulation,

while noting that a tradable permit system is one of the policy instruments that has

been shown to be environmentally effective in the industrial sector, as long as

there are reasonable levels of predictability over the initial allocation mechanism

and long-term price.
http://en.wikipedia.org/wiki/Carbon_credit#cite_note-epav-1http://en.wikipedia.org/wiki/Investopediahttp://en.wikipedia.org/wiki/Investopediahttp://en.wikipedia.org/wiki/Carbon_credit#cite_note-id-2http://en.wikipedia.org/w/index.php?title=Carbon_credit&action=edit&section=2http://en.wikipedia.org/wiki/Greenhouse_gashttp://en.wikipedia.org/wiki/Carbon_dioxidehttp://en.wikipedia.org/wiki/Methanehttp://en.wikipedia.org/wiki/Nitrous_oxidehttp://en.wikipedia.org/wiki/Fluorocarbon#Chlorofluorocarbons_and_hydrofluorocarbonshttp://en.wikipedia.org/wiki/Climate_Changehttp://en.wikipedia.org/wiki/Carbon_credit#cite_note-4http://en.wikipedia.org/wiki/Carbon_credit#cite_note-epav-1http://en.wikipedia.org/wiki/Investopediahttp://en.wikipedia.org/wiki/Carbon_credit#cite_note-id-2http://en.wikipedia.org/w/index.php?title=Carbon_credit&action=edit&section=2http://en.wikipedia.org/wiki/Greenhouse_gashttp://en.wikipedia.org/wiki/Carbon_dioxidehttp://en.wikipedia.org/wiki/Methanehttp://en.wikipedia.org/wiki/Nitrous_oxidehttp://en.wikipedia.org/wiki/Fluorocarbon#Chlorofluorocarbons_and_hydrofluorocarbonshttp://en.wikipedia.org/wiki/Climate_Changehttp://en.wikipedia.org/wiki/Carbon_credit#cite_note-4


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The mechanism was formalized in theKyoto Protocol, an international agreement

between more than 170 countries, and the market mechanisms were agreed

through the subsequent Marrakesh Accords. The mechanism adopted was similar

to the successful US Acid Rain Program to reduce some industrial pollutants.

[edit] Emission allowances

Under the Kyoto Protocol, the 'caps' or quotas for Greenhouse gases for the

developed Annex 1countries are known as Assigned Amounts and are listed in

Annex B.[6] The quantity of the initial assigned amount is denominated in

individual units, called Assigned amount units (AAUs), each of which represents

an allowance to emit one metric tonne of carbon dioxide equivalent, and these are

entered into the country's national registry.[7]

In turn, these countries set quotas on the emissions of installations run by local

business and other organizations, generically termed 'operators'. Countries

manage this through their national registries, which are required to be validated

and monitored for compliance by the UNFCCC.[8] Each operator has an allowance

of credits, where each unit gives the owner the right to emit one metric tonne of

carbon dioxide or other equivalent greenhouse gas. Operators that have not usedup their quotas can sell their unused allowances as carbon credits, while

businesses that are about to exceed their quotas can buy the extra allowances as

credits, privately or on the open market. As demand for energy grows over time,

the total emissions must still stay within the cap, but it allows industry some

flexibility and predictability in its planning to accommodate this.

By permitting allowances to be bought and sold, an

operator can seek out the most cost-effective way of reducing its emissions, either

by investing in 'cleaner' machinery and practices or by purchasing emissions from

another operator who already has excess 'capacity'.
http://en.wikipedia.org/wiki/Kyoto_Protocolhttp://en.wikipedia.org/wiki/Kyoto_Protocolhttp://en.wikipedia.org/wiki/United_Nations_Framework_Convention_on_Climate_Change#2001_.E2.80.93_COP_7.2C_Marrakech.2C_Moroccohttp://en.wikipedia.org/wiki/United_Nations_Framework_Convention_on_Climate_Change#2001_.E2.80.93_COP_7.2C_Marrakech.2C_Moroccohttp://en.wikipedia.org/wiki/Acid_Rain_Programhttp://en.wikipedia.org/w/index.php?title=Carbon_credit&action=edit&section=3http://en.wikipedia.org/wiki/Kyoto_Protocolhttp://en.wiktionary.org/wiki/quotahttp://en.wikipedia.org/wiki/Greenhouse_gaseshttp://en.wikipedia.org/wiki/United_Nations_Framework_Convention_on_Climate_Change#Annex_I_countrieshttp://en.wikipedia.org/wiki/United_Nations_Framework_Convention_on_Climate_Change#Annex_I_countrieshttp://en.wikipedia.org/wiki/Carbon_credit#cite_note-5http://en.wikipedia.org/wiki/Carbon_credit#cite_note-5http://en.wikipedia.org/wiki/Assigned_amount_unitshttp://en.wikipedia.org/wiki/Carbon_credit#cite_note-6http://en.wikipedia.org/wiki/Carbon_credit#cite_note-6http://en.wikipedia.org/wiki/UNFCCChttp://en.wikipedia.org/wiki/Carbon_credit#cite_note-7http://en.wikipedia.org/wiki/Carbon_credit#cite_note-7http://en.wikipedia.org/wiki/Carbon_dioxidehttp://en.wikipedia.org/wiki/Greenhouse_gashttp://en.wikipedia.org/wiki/Kyoto_Protocolhttp://en.wikipedia.org/wiki/United_Nations_Framework_Convention_on_Climate_Change#2001_.E2.80.93_COP_7.2C_Marrakech.2C_Moroccohttp://en.wikipedia.org/wiki/Acid_Rain_Programhttp://en.wikipedia.org/w/index.php?title=Carbon_credit&action=edit&section=3http://en.wikipedia.org/wiki/Kyoto_Protocolhttp://en.wiktionary.org/wiki/quotahttp://en.wikipedia.org/wiki/Greenhouse_gaseshttp://en.wikipedia.org/wiki/United_Nations_Framework_Convention_on_Climate_Change#Annex_I_countrieshttp://en.wikipedia.org/wiki/Carbon_credit#cite_note-5http://en.wikipedia.org/wiki/Assigned_amount_unitshttp://en.wikipedia.org/wiki/Carbon_credit#cite_note-6http://en.wikipedia.org/wiki/UNFCCChttp://en.wikipedia.org/wiki/Carbon_credit#cite_note-7http://en.wikipedia.org/wiki/Carbon_dioxidehttp://en.wikipedia.org/wiki/Greenhouse_gas


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Since 2005, the Kyoto mechanism has been adopted for CO2 trading by all the

countries within the European Union under its European Trading Scheme (EU

ETS) with the European Commission as its validating authority.[9] From 2008, EU

participants must link withthe other developed countries whoratifiedAnnex I of

the protocol, and trade the six most significant anthropogenic greenhouse gases.

In the United States, which has not ratified Kyoto, and Australia, whose

ratification came into force in March 2008, similar schemes are being considered.

[edit] Kyoto's 'Flexible mechanisms'

A tradable credit can be an emissions allowance or an assigned amount unit which

was originally allocated or auctioned by the national administrators of a Kyoto-

compliant cap-and-trade scheme, or it can be an offset of emissions. Such

offsetting and mitigating activities can occur in any developing country which has

ratified the Kyoto Protocol, and has a national agreement in place to validate its

carbon project through one of the UNFCCC's approved mechanisms. Once

approved, these units are termed Certified Emission Reductions, or CERs. The

Protocol allows these projects to be constructed and credited in advance of the

Kyoto trading period.

The Kyoto Protocol provides for three mechanisms that enable countries or

operators in developed countries to acquire greenhouse gas reduction credits[10]

Under Joint Implementation (JI) a developed country with

relatively high costs of domestic greenhouse reduction would set up a

project in another developed country.

Under the Clean Development Mechanism (CDM) a developed

country can 'sponsor' a greenhouse gas reduction project in a developing

country where the cost of greenhouse gas reduction project activities is

usually much lower, but the atmospheric effect is globally equivalent. The

developed country would be given credits for meeting its emission
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reduction targets, while the developing country would receive the capital

investment and clean technology or beneficial change in land use.

Under InternationalEmissions Trading (IET) countries can trade in

the international carbon credit market to cover their shortfall in Assigned

amount units. Countries with surplus units can sell them to countries that

are exceeding their emission targets under Annex B of the Kyoto Protocol.

These carbon projects can be created by a national government or by an operator

within the country. In reality, most of the transactions are not performed by

national governments directly, but by operators who have been set quotas by their

country.

[edit] Emission markets

For trading purposes, one allowance or CER is considered equivalent to one

metric ton of CO2 emissions. These allowances can be sold privately or in the

international market at the prevailing market price. These trade and settle

internationally and hence allow allowances to be transferred between countries.

Each international transfer is validated by the UNFCCC. Each transfer of

ownership within the European Union is additionally validated by the EuropeanCommission.

Climate exchanges have been established to provide a spot marketin allowances,

as well as futuresand optionsmarket to help discover a market price and maintain

liquidity. Carbon prices are

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