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creases from one period to the next, that is basically what cap-and-trade
means. However the EU linked the EU ETS to the Flexible Mechanisms of
the Kyoto Protocol by allowing a certain number of emissions reductions
created under CDM or JI projects to be used and traded at the EU ETS.
The voluntary market
Beyond the CDM and JI, there is the growing unofficial offset industry, a
range of both charitable and profit-making groups which broker offsets.
Since emission reduction projects under the Kyoto protocol carry a huge re-
sponsibility, the criteria they have to comply with in order to be eligible are
very strict and for some type of projects not at all achievable. This is one rea-
son why projects and related emission reductions are also created outside
the compliance market which can be purchased on the “voluntary market”.
But they cannot be used for Emissions Trading under the Kyoto Protocol.
However, there is a legally-binding voluntary market where parties can set
self-imposed, legally binding greenhouse gas emissions reductions targets
the Chicago Climate Exchange
(CCX)
.
Registries, which are usually set up for a specific system, have been devel-
oped for the voluntary market by governments, non-profits, and the private
sector, but often not yet applied. Some of the registries are tied to certain
standards whereas others function independently. Most voluntary standard
registries are still in the planning stage and not yet operational.
The voluntary market is still new but appears to be growing fast. The Cli-
mate Group estimates that it doubled to trade in about 20 Megatonnes (Mt)
of CO
2
equivalent in 2006, a figure it expects to grow to around 400 Mt
CO
2
equivalent by 2010. In the voluntary market there are no overarching
or compulsory standards or methodologies for creating credits. There are,
however, a number of voluntary standards emerging in an attempt to bring
greater robustness and harmonization to the voluntary offset marketplace.
The CCX was launched in 2003 and is a voluntary, legally binding integrated
trading system to reduce emissions of the six major greenhouse gases with offset
projects worldwide. CCX employs independent verification, and has been trading
greenhouse gas emission allowances since 2003. The companies joining the ex-
change commit to reducing their aggregate emissions by 6 per cent by 2010. To
date the exchange has more than 350 members.