(n)operation of carbon markets

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OPERATIONOFCARBONMARKETSCAPANDTRADESYSTEM

CLEAN DEVELOPMENT MECHANISM

CHE 543: Catalysis for Green Technologies

Prepared by: Cansu Yass

Merve Ayvaz

Submitted to: Prof. Dr. Erhan Aksoylu1


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INTRODUCTION

The basic requirement of Kyoto protocol is that countries limit or

reduce their greenhouse gas emissions.

To help countries meet their emission targets, and to encourage the

private sector and developing countries to contribute to emission

reduction efforts, negotiators of the Protocol included three

market-based method thereby creating what is now known as thecarbon market. Kyoto mechanisms are:

Emissions Trading System

The Clean Development Mechanism

Joint Implementation.

Emission reductions took on economic value by setting such

targets.

United Nations Framework Convention on Climate Change

KYOTO

JI

ETSCDM

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KYOTO MECHANISIM

The Kyoto Protocol allows to Parties add to (or subtract from)

their initial assigned amount by trading Kyoto units with

other Parties.


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added to its assignedamount

Kyoto unitsacquired by a Party

under the Kyoto

mechanisms are

subtracted from the

transferring Partys

assigned amount.

whereas unitstransferred to

another Party are


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EMISSONS TRADING

The number of units that a Party may transfer to other Parties is

limited by the Partys commitment period reserve (CPR). The CPR is the minimum level of units that a Party must hold in its national

registry at all times.

Annex I Parties may choose to implement domestic or regional (e.g.

with a group of Parties) schemes for entity-level emissions trading,

under their authority and responsibility.

Kyoto Protocol emissions trading forms an umbrella under which

national and regional trading schemes operate; entity-level trading

uses Kyoto units and needs to be reflected in the Kyoto Protocolaccounting.

The European Union emissions trading scheme (EU ETS) is one example of a

regional trading system operating under the Kyoto Protocol umbrella.

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HOW DOES IT WORK?

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Firm A

Firm C

Firm B

Quota: 1 000 000 tons

Used: 850 000 tons

CO2

Quota: 1 200 000 tons

Used: 1 450 000 tons

CO2

Quota: 800 000 tons

Used: 700 000 tons

CO2

1500

00ton

CO2

100000ton

CO2

3.6 million

EURO

2.4 million

EURO


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CLEANDEVELOPMENTMECHANISIM

TheCDM

allows emission-reduction projects in developingcountries to earn certified emission reduction (CER) credits, each

equivalent to one tonne of CO2.

These CERs can be traded and sold, and used by industrialized

countries to a meet a part of their emission reduction targets underthe Kyoto Protocol.

The mechanism stimulates sustainable development and emission

reductions,

while giving industrialized countries some flexibility in how they meettheir emission reduction limitation targets.


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JOINTIMPLEMENTATION

Joint implementation (JI) is a project-based mechanism by which

One Annex I Party can invest in a project that reduces emissions or

enhances sequestration in another Annex I Party, and receive credit for the

emission reductions or removals achieved through that project.

The unit associated with JI is called an emission reduction unit

(ERU).

The emission reductions or removals resulting from the projectmust also be verified by an accredited independent entity in order

for the Party concerned to issue ERUs.


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REFERENCE

United Nations Framework Convention on ClimateChange

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