Risk glossary

 

Emissions trading

Emissions trading, as set out in Article 17 of the Kyoto Protocol, allows countries that have emission units to spare - emissions permitted them but not ‘used’ - to sell this excess capacity to countries that are over their targets.

Thus, a new commodity was created in the form of emission reductions or removals. Since carbon dioxide is the principal greenhouse gas, people speak simply of trading in carbon. Carbon is now tracked and traded like any other commodity. This is known as the carbon market.

* see also CO2, carbon, cap and trade

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