How To Interpret Carbon Trading
A kind of emissions trading specifically for carbon dioxide is called carbon emissions trading. It is measured in tonnes of carbon dioxide equivalent, or tCO2e. Carbon trading also presently makes up the bulk of emissions trading the world over.
What Is The Kyoto Protocol?
Carbon trading is one of the ways countries can meet their obligations set by the Kyoto Protocol to reduce carbon emissions and therefore alleviate global warming.
The United Nations Framework Convention on Climate Change (also known as the UNFCCC or FCCC) created the Kyoto Protocol. It is a protocol aimed at fighting global warming, along with the consequences and fears involved with it.
Carbon Trade Units
The carbon trading units can be transferred under Article 17 emissions trading. Each unit of measurement is equal to one metric tonne of emissions (in CO2-equivalent terms). Hence, it, may be in the form of any of the following:
- An assigned amount unit (AAU) is issued by an Annex I Party on the basis of its assigned amount pursuant to Articles 3.7 and 3.8 of the Protocol.
- A certified emission reduction (CER) is generated from a clean development mechanism project activity under Article 12 of the Kyoto Protocol.
- An emission reduction unit (ERU) is generated by a joint implementation project under Article 6 of the Kyoto Protocol.
- A removal unit (RMU) is issued by an Annex I Party on the basis of land use, land-use change and forestry (LULUCF) activities under Articles 3.3 and 3.4 of the Kyoto Protocol.
Transfers and acquisitions of these units are to be tracked and recorded through the registry systems under the Kyoto Protocol.
Carbon Trading Lately
In the past few years, carbon trade has been steadily increasing. According to the World Bank’s Carbon Finance Unit, 374 million metric tonnes of carbon dioxide equivalent (mtCO2e) were exchanged through projects in 2005, a 240% increase relative to 2004 (110 mtCO2e) which was itself a 41% increase relative to 2003 (78 mtCO2e).
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