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Carbon Markets OverviewTo encourage the reduction of carbon emissions, markets have evolved to trade carbon reductions as tradable commodities and to provide revenue streams to qualified projects. There are two types of markets for carbon emission reductions: Mandatory and Voluntary. In mandatory markets participants are required by law to meet government set emission targets either through emission reductions or through the purchase of emission credits. For voluntary markets, as the name implies, there are no mandated emission reduction requirements. Organizations participate voluntarily for a variety of reasons.KyotoThe largest and most developed market for carbon emissions reductions was created under the United Nations Framework Convention on Climate Change through the Kyoto protocol which created legally binding emission reduction targets for industrialized nations.
The Kyoto protocol has served as a model for the development of many other regional emission reduction schemes. These include markets in countries not covered by Kyoto (US) and voluntary markets. The Kyoto protocol was adopted in December 1997 and entered into force in February 2005. The current version of the Kyoto protocol runs through 2012, but a new treaty is scheduled to be negotiated by December 2009 to take effect in January 2013. The United States is the only major country that has not yet adopted the Kyoto protocol. The US administration and congressional leaders are currently discussing plans to implement a cap and trade or a Kyoto style emission reduction program in the near future. |






