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Background on the Carbon Market

Today’s carbon market is driven predominantly by the commitments countries have made under the Kyoto Protocol. The Kyoto Protocol to the UN Framework Convention on Climate Change aims to reduce greenhouse gas (GHG) emissions in the atmosphere by an average of 5.2% of their 1990 levels -by 2012. Under the Protocol, industrialised countries committed to specific emission reduction targets. Within the European Union the target was reallocated among member states in the 1998 burden sharing agreement.

The Kyoto Protocol outlines the creation of markets for GHG emission reductions through emission trading and project-based emission crediting. The so-called “flexible” mechanisms, the Clean Development Mechanism (CDM), Joint Implementation (JI) and International Emissions Trading, are among the most innovative aspects of the climate change regime.

Countries that ratified the Kyoto Protocol are in the process of developing strategies for meeting their specific emission reduction targets. They are expected to rely primarily on domestic policies and measures implemented by both the public and the private sectors with most targets allocated to the private sector. The European Emissions Trading Scheme (EU ETS) is one example of a policy where industrialised countries transfer their national commitments into emission reduction targets for a group of private sector entities.

Private and public sector entities can achieve emission reductions by implementing emission-limiting measures in their own installations or make use of the CDM and JI. These mechanisms offer project developers in developing countries (CDM) and in Central and Eastern Europe (JI) the opportunity to attract financing for sustainable development projects. Governments and companies in industrialised countries can use the carbon credits from these projects to offset their own emissions.

Online Resources

Among the thousands of internet resources on climate change, these are some of our favourites:

United Nations Framework Convention on Climate Change (UNFCCC)
The central organisation in the climate world
http://www.unfccc.int/

World Bank Carbon Finance Business (CFB)
Home to pioneering programmes as Prototype Carbon Fund, BioCarbon Fund and Community Development Carbon Fund
http://www.carbonfinance.org/

SenterNovem Carboncredits.nl
Home to pioneering programmes ERUPT and CERUPT
http://www.carboncredits.nl/

Global Public Policy Institute (GPPi)
GPPi is an independent, non-profit think tank for research on effective and accountable governance.
http://www.gppi.net/

International Emissions Trading Association (IETA)
Professional association of companies working in emissions trading.
http://www.ieta.org/

Emissions Marketing Association (EMA)
Professional association of companies working in emissions trading.
http://www.emissions.org/

PointCarbon
News and market information service on carbon markets.
http://www.pointcarbon.com/

Joint Implementation Quarterly (JIQ)
Independent news and opinion service on Joint Implementation and Clean Development Mechanism
http://www.jiqweb.org