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From Poverty to Power Green, Oxfam 2008 - weman

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FROM POVERTY TO POWERreduce the quantity of emissions, which is the critical fac<strong>to</strong>r in combatingglobal warming.Another approach that has gained great momentum combinesstandards and taxes <strong>to</strong> use price pressures <strong>to</strong> drive down carbon usevia a regional,national,or global market for carbon emissions reductions.Modelled on US efforts <strong>to</strong> reduce sulphur dioxide emissions under theClean Air Act, carbon trading allows companies <strong>to</strong> buy and sell‘carbon permits’ so that those who find it easiest <strong>to</strong> reduce emissionsdo so, and make a profit by selling the resulting carbon savings <strong>to</strong>other companies who find it harder <strong>to</strong> cut their carbon footprint.While individual governments have used all of the aboveapproaches <strong>to</strong> reducing emissions, carbon trading has been adoptedas a central <strong>to</strong>ol for driving the global response, and it is evolvingquickly. In 2006, international carbon markets turned over around$30bn (1.6bn <strong>to</strong>nnes of carbon emissions, or CO 2e 228 ) and volumeswere expected <strong>to</strong> double in 2007. 229 The largest markets are theEuropean Union’s Emission Trading Scheme (EU ETS), which wasworth $24bn in 2006 (1bn <strong>to</strong>nnes of CO 2e) and the Kyo<strong>to</strong> Pro<strong>to</strong>col’sClean Development Mechanism (CDM), worth $5bn (520m <strong>to</strong>nnes).The remaining carbon markets – incipient domestic markets inAustralia, Japan, Canada, and the USA – form a tiny fraction of <strong>to</strong>talvolumes. 230 Unlike the EU scheme or the CDM, these are not tied <strong>to</strong>the Kyo<strong>to</strong> commitments. There is also a small but growing voluntarymarket in offsets ($100m/20m <strong>to</strong>nnes of CO 2ein 2006).The two main types of carbon trading that make up <strong>to</strong>day’s marketsare emissions trading and offset trading. In the former, also known as‘cap and trade’, the government sets a ceiling (or cap) on emissionsfrom a particular economic sec<strong>to</strong>r and a schedule for lowering thatceiling over time. Companies in that sec<strong>to</strong>r are allocated a tradeablepermit (or allowance) for their emissions, and must pay a fine if theiremissions exceed that amount. Companies that find it cheaper <strong>to</strong>reduce their emissions can do so and sell their permits <strong>to</strong> other, dirtier,companies. The EU Emissions Trading Scheme is an early example ofthis kind of carbon market.Trading in carbon offsets involves reducing emissions from projectsoutside of an economy that has an established manda<strong>to</strong>ry cap onemissions. For example, by funding an energy efficiency project in a414

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