The carbon market is one of the fastest growing markets in the world today and latest figures from the World Bank show it more than doubled in size in 2007, growing to US$64 billion. It has been expanding rapidly since 1997, when the Kyoto Protocol capped emissions of greenhouse gases. These are measured and traded in tonnes of carbon dioxide equivalent (CO2e).

Carbon markets
There are two different types of carbon transaction:
  • Allowance-based transactions - carbon units which offer a “right to pollute”, and are created and assigned by regulators under cap-and-trade schemes, such as the EU Emissions Trading Scheme (EU ETS). EUAs are traded in this scheme.
  • Project-based transactions - carbon units often referred to as offsets or carbon credits, which aim to negate or neutralise greenhouse gas emissions released in one place by avoiding the release of emissions elsewhere. The Kyoto Protocol Clean Development Mechanism (CDM) and Joint Implementation (JI) schemes allow for the development of projects which give rise to carbon credits known as CERs and ERUs respectively.
EU ETS
The EU ETS is the largest multi-national, greenhouse gas emissions trading scheme in the world. It covers over 10,000 companies representing in excess of 2 billion tonnes of CO2 emissions. It is a ‘cap-and-trade’ system designed to regulate industrial CO2 emissions within the European Union to meet Kyoto targets. Companies affected by the scheme are allocated a quota of EUAs. If their real emissions exceed this allocated quota they can purchase additional EUAs in the market, or supplement these with CERs and ERUs.

Emissions Trading policy in the UK
For policy updates and policy related resources relating to the UK, please see below.

Administrative Bodies

Further Resources


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