What’s carbon trading?

Parties with commitments under the Kyoto Protocol, the industrialized countries with greenhouse gas emission limitations, have accepted targets for limiting or reducing emissions. These targets are expressed as levels of allowed emissions or ‘assigned amounts’ over the 2008-2012 commitment periods. Emissions trading, as set out in Article 17 of the Kyoto Protocol, allows countries that have emission units to spare – emissions permitted them but not ‘used’ – to sell this excess capacity to countries that are over their targets. Thus, a new commodity was created in the form of emission reductions or removals. Since carbon dioxide is the principle greenhouse gas, people speak simply of trading in carbon. Carbon is now tracked and traded like any other commodity. This is known as the carbon market.

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