The Kyoto Protocol broke new ground by defining three innovative "flexibility mechanisms" to lower the overall costs of achieving its emissions targets. These mechanisms enable Parties to access cost-effective opportunities to reduce emissions or to remove carbon from the atmosphere in other countries. While the cost of limiting emissions varies considerably from region to region, the benefit for the atmosphere is the same, wherever the action is taken.
Emissions trading, one of the Kyoto's flexibility mechanism set out in Article 17 of the Protocol, provides for Annex I Parties to acquire emission reduction units from other Annex I Parties and use them towards meeting their emissions targets under the Kyoto Protocol. This enables Parties to make use of lower cost opportunities to reduce emissions, irrespective of the Party in which those opportunities exist.
Only Annex I Parties to the Kyoto Protocol with emission limitation and reduction commitments inscribed in Annex B to the Protocol may participate in such trading. Such Parties may therefore be prepared to transfer units when they do not require them for compliance with their own emission targets.
This section provides information on financial institutions and banks involved in the emissions trading mechanisms as well as carbon funds, facilities and programs that have been established in response to the demand for carbon credits.
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