Emissions—who is trading what?

15 Aug 2008

Since the United Nations Framework Convention on Climate Change and the Kyoto Protocol to that Convention, came into force in 2005, emissions trading has been the preferred approach for any international efforts to control, and eventually reduce, greenhouse gas emissions.

There are several emission trading schemes already in operation and others at the planning stage. The purpose of this note is to provide the reader with a brief overview of emissions trading, the types of trading schemes and an examination of existing and proposed schemes.
Emissions trading schemes are based around the concept of setting a desired level of emissions and issuing a number of tradeable permits or allowances, allowing this level of emissions to be made. The number of tradeable permits is fixed, in effect limiting the total quantity of emissions that can be made in any one period. Tradeable permits are quotas, allowances or ceilings on emissions levels that, once allocated to an emitter, can be traded subject to a set of prescribed rules.

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