OPERATION OF CARBON MARKETS

CAP AND TRADE SYSTEM CLEAN DEVELOPMENT MECHANISM

CHE 543: Catalysis for Green Technologies Prepared by: Cansu Yass Merve Ayvaz

Submitted to: Prof. Dr. Erhan Aksoylu

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 the carbon market. Kyoto mechanisms are:
ETS

CDM JI

Emissions Trading System The Clean Development Mechanism Joint Implementation.

KYOTO

Emission reductions took on economic value by setting such targets.

United Nations Framework Convention on Climate Change

KYOTO MECHANISIM

The Kyoto Protocol allows to Parties add to (or subtract from) their initial assigned amount by trading Kyoto units with other Parties.

Kyoto units acquired by a Party under the Kyoto mechanisms are whereas units transferred to another Party are

added to its assigned amount

subtracted from the transferring Partys assigned amount.

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United Nations Framework Convention on Climate Change

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 Protocol accounting.

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?

Firm A Quota: 1 000 000 tons Used: 850 000 tons CO2
3.6 million EURO

Firm B Quota: 800 000 tons Used: 700 000 tons CO2
2.4 million EURO

150 000 ton CO2

Firm C Quota: 1 200 000 tons Used: 1 450 000 tons CO2

100 000 ton CO2

CLEAN DEVELOPMENT MECHANISIM

The CDM allows emission-reduction projects in developing countries 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 under the Kyoto Protocol.

The mechanism stimulates sustainable development and emission reductions,

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

United Nations Framework Convention on Climate Change

JOINT IMPLEMENTATION

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 project must also be verified by an accredited independent entity in order for the Party concerned to issue ERUs.
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United Nations Framework Convention on Climate Change

REFERENCE
United Nations Framework Convention on Climate Change