![]() Reductions or removals in one country can count as credits in another country that has paid or traded for them. Kyoto provided three mechanisms by which signatories could obtain carbon credits: joint implementation, the Clean Development Mechanism, and emissions trading. Countries could meet this goal either by actually reducing their emissions or by acquiring carbon credits that represented reductions elsewhere. Specifically, industrialized countries signing the protocol agreed to reduce their greenhouse emissions to 5.2% below 1990 levels by 2012. The Kyoto Protocol defined targets for reduced greenhouse emissions from its industrialized signatories, namely, all the industrialized countries except the United States and Australia. In 1992, the United Nations Framework Convention on Climate Change (UNFCCC) committed all its signatories-virtually every country in the world-to “formulate, implement, publish and regularly update national and, where appropriate, regional programmes containing measures to mitigate climate change by addressing anthropogenic emissions by sources and removals by sinks.” In 1997, to fulfill this earlier commitment, most countries signed the Kyoto Protocol to the UNFCCC. Historical Background and Scientific Foundations In this article, only carbon credits that are a tradable commodity in a legally defined emissions trading system are discussed. It is discussed in the entry “Offsetting” in this set. ![]() ![]() Offsetting of this kind is not a tradable commodity but a one-time purchase made for reasons of conscience or public relations. ![]() The term carbon credits is sometimes used interchangeably with the term carbon offsets, but the latter often refers to voluntary purchase by businesses or individuals of decreased CO 2 emissions in order to cancel out their own emissions (for example, paying a company to plant trees to cancel out the carbon released by one's air travel). The largest system of carbon credits and emissions trading was established by the Kyoto Protocol in 2005. Participation by polluters in emissions trading markets may be voluntary, as with the Chicago Climate Exchange, or mandatory, as with the European Climate Exchange. They are created by governments and bought and sold on emissions trading markets. Carbon credits are financial abstractions, similar to money, that entitle their possessor to emit a certain amount of carbon dioxide (CO 2) or other greenhouse gases. ![]()
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