Economics Carbon Trading Questions Medium
The Clean Development Mechanism (CDM) is a flexible mechanism under the Kyoto Protocol, an international agreement aimed at reducing greenhouse gas emissions. The CDM allows developed countries to invest in emission reduction projects in developing countries as a way to offset their own emissions.
Under the CDM, developed countries can earn Certified Emission Reductions (CERs) by investing in projects that reduce emissions in developing countries. These projects can include renewable energy projects, energy efficiency improvements, or initiatives that promote sustainable development.
The CERs earned through these projects can then be used by developed countries to meet their emission reduction targets. They can either be used to offset their own emissions or be traded on the carbon market. This is where the connection to carbon trading comes in.
Carbon trading is a market-based approach to reducing emissions, where countries or companies can buy and sell emission allowances or credits. The CERs earned through the CDM can be traded on this carbon market, allowing developed countries to meet their emission reduction targets by purchasing credits from developing countries.
In summary, the Clean Development Mechanism (CDM) is a mechanism that allows developed countries to invest in emission reduction projects in developing countries. It relates to carbon trading as the Certified Emission Reductions (CERs) earned through these projects can be traded on the carbon market, enabling developed countries to meet their emission reduction targets.