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Emission Trading: A New Commodity
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Emission Trading in a nutshell…
Emissions trading (ET) is a mechanism that enables countries with legally binding emissions targets to buy and sell emissions allowances among themselves Under an emissions trading system, the quantity of emissions is fixed (often called a "cap") and the right to emit becomes a tradable commodity. The cap (say 10,000 tons of carbon) is divided into transferable units (10,000 permits of 1 ton of carbon each)
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How it works The plan works by capping the amount of total emissions that can be released by one company or business Put simply, cap and trade is a market-based tool usually used by a state or central government to reduce pollution in the atmosphere. the ‘responsible authorities’ set a limit on allowable emissions, which is gradually lowered over time towards a national reduction target. Permits are issued to companies indicating their right to emit a specific amount of pollution. If a firm emits less than its quota, it can sell surplus allowances; if it emits more than allowed, it has to buy allowances
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Carbon Trading Carbon credits are an element used to aid in regulation of the amount of gases that are being released into the air. This is part of a larger international plan which has been created in an effort to reduce global warming and its effects. 1 tonne (1 metric ton)= 1000 kilograms
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Carbon credits can also be bought and sold in international markets at whatever the determined market value for them is.
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Kyoto Protocol The Kyoto Protocol is a legally binding agreement that arose out of the UNFCCC to tackle climate change through a reduction of green house gas emissions. It was adopted in Kyoto, Japan, on 11th December 1997 Its objective was the stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent air pollution interference with the climate system
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Clean Development Mechanisms mechanism whereby a country may purchase emission reductions which arise from projects located in non-Annex (Kyoto) countries. The carbon credits that are generated by a CDM project are called Certified Emission Reductions(CERs), expressed in tons of CO2 equivalent
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Joint implementation Emissions trading (ET) is a mechanism that enables countries with legally binding emissions targets to buy and sell emissions allowances among themselves
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