What Agreement Initiated the Original Carbon Market Where Countries Could Trade Excess Emissions

The concept of carbon trading emerged as a way to address global warming caused by the excessive emission of greenhouse gases. The original agreement that initiated the carbon market was the Kyoto Protocol, signed in 1997 by countries that are members of the United Nations Framework Convention on Climate Change (UNFCCC).

The Kyoto Protocol established legally binding emission reduction targets for developed countries, with a reduction of at least 5% below 1990 levels. To achieve these targets, countries could either reduce their emissions or purchase carbon credits from other countries that had reduced their emissions beyond the required amount.

The carbon market is based on the principle of cap-and-trade. This means that a cap is set on the total amount of greenhouse gas emissions that can be released within a certain time frame. The cap is then divided into allowances, which are allocated to companies or nations. These allowances can be traded on a market, allowing companies or nations that emit less than their allocation to sell their excess allowances to those that emit more.

The Kyoto Protocol established two types of carbon credits: Certified Emission Reductions (CERs) and Emission Reduction Units (ERUs). CERs are generated under the Clean Development Mechanism (CDM), which allows developed countries to invest in emission reduction projects in developing countries. ERUs are generated under Joint Implementation (JI), which allows developed countries to invest in emission reduction projects in other developed countries.

The Kyoto Protocol expired in 2012 and was replaced by the Paris Agreement, signed in 2015. The Paris Agreement aims to limit global warming to below 2 degrees Celsius above pre-industrial levels and pursue efforts to limit it to 1.5 degrees Celsius. The agreement does not establish a global cap on emissions, but requires countries to submit their own nationally determined contributions (NDCs) to reduce emissions.

Despite the expiration of the Kyoto Protocol, the carbon market continues to operate. The EU Emissions Trading System (EU ETS) is the world`s largest carbon market and operates under the Paris Agreement. Other countries, such as China and South Korea, are also implementing their own carbon trading systems.

In conclusion, the Kyoto Protocol initiated the original carbon market where countries could trade excess emissions. The carbon market is based on the principle of cap-and-trade, and the Kyoto Protocol established two types of carbon credits: CERs and ERUs. The Paris Agreement replaced the Kyoto Protocol, but the carbon market continues to operate under the EU ETS and other national trading systems.