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.””
The other units which may be transferred under the scheme, may be in the form of:
• A removal unit (RMU) on the basis of land use, land-use change and forestry (LULUCF) activities such as reforestation.
• An emission reduction unit (ERU) generated by a joint implementation project.
• A certified emission reduction (CER) generated from a clean development mechanism project activity.
An international transaction log ensures secure transfer of emission reduction units between countries.