Handbook on Energy and Climate Change
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Handbook on Energy and Climate Change

Edited by Roger Fouquet

This timely Handbook reviews many key issues in the economics of energy and climate change, raising new questions and offering solutions that might help to minimize the threat of energy-induced climate change.
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Chapter 21: Carbon trading: past, present and future

Julien Chevallier


The European Union Emissions Trading Scheme (EU ETS) was created on 1 January 2005 to reduce by 8 per cent CO2 emissions by 2012, relative to 1990 emissions levels. This aggregated emissions reduction target in the EU has been achieved following differentiated agreements, sharing efforts between member states based on their potential of CO2 emissions reduction. The introduction of a tradable permits market has been decided to help member states in achieving their targets in the Kyoto Protocol. Among the members of Annex B, these agreements include CO2 emissions reductions for 38 industrialized countries, with a global reduction of CO2 emissions by 5.2 per cent. The commitment period of the Kyoto Protocol goes from 1 January 2008 to 31 December 2012. Industrial operators may cut the costs of reducing their emissions by using credits issued from the Kyoto Protocol Clean Development Mechanism (CDM), called certified emissions reductions (CERs). These CERs correspond to one tonne of CO2 emissions avoided in the atmosphere, and may be obtained through projects developed in non-Annex-B countries of the Kyoto Protocol that allow to reduce emissions compared to a baseline scenario. Once credits have been issued by the CDM executive board (EB) of the United Nations, they may be sold by project developers on the market, and thus become secondary CERs (sCERs).

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