The implementation of a number of international policy instruments has led to the development of a range of carbon markets in which carbon abatement or ACCUs can be bought and sold. There are two broad types of carbon market—compliance markets and voluntary markets:
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The carbon units in these markets are usually exchanged on a common trading platform, in a way very similar to the trading of company shares or futures contracts for agricultural commodities.
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Compliance markets are those that are established in response to particular regulatory requirements for greenhouse gas abatement imposed on industries. Compliance markets include those in the European Union, California and New Zealand.
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These markets operate emissions trading schemes in which permits to emit greenhouse gases, along with offsets (see below), are traded among market participants (see Box 3.3).
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Voluntary carbon markets cover all payments for third-party emissions reductions (usually called ‘offsets') that occur outside of government regulation. Examples include the offsets that consumers can purchase with airline tickets. Voluntary markets generally involve a direct commercial relationship between the seller and the buyer. That relationship may include an intermediary, such as a bank, broker or other financial institution.
Box 3.3: Emissions trading |
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