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Countries obliged under the Kyoto Protocol to limit or reduce greenhouse gas emissions must reach their targets primarily through national measures.

Additionally the Kyoto Protocol created three market-based mechanisms as to help achieve these goals:
• Emissions Trading
• Joint Implementation (JI)
• Clean Development Mechanism (CDM)

In the case of Emissions Trading and Joint Implementation only industrialized countries committed to emission reductions work together. Clean Development Mechanism (CDM) encourages the cooperation between industrialized and developing countries.

Between industrialized countries:
Emissions Trading

If country “A” manages to reduce its emissions by more than it’s obliged to do, country “A” may sell this “excess capacity” to country B so that country “B” may achieve some of its reduction targets. An international software-based accounting system ensures safe transfer of emission reduction units between countries.

Between industrialized countries:
Joint Implementation (JI)

Here, country “A” conducts a project in country “B”. While the emission reduction takes place in country “B”, this reduction is credited to country “A”. Joint Implementation offers country “A” a flexible and cost-effective way to achieve its Kyoto commitments, while industrialized country “B” benefits from foreign investment and technology transfer.

Between industrialized and developing countries:
Clean Development Mechanism (CDM)

Similar to Joint Implementation country “A” can execute a project in country “B”. The difference: country “A” is an industrialized country obligated to emission reductions while country “B” is a developing country that is not required to reduce emissions.


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