How does the carbon offset market work?
Carbon offset markets can be divided into regulatory and voluntary. The European Union Emissions Trading System (EU-ETS) is currently the largest carbon offset market in the world and acts as a market in emissions reduction. It employs a wide range of international offset types as part of the efforts by EU nations to meet their Kyoto Treaty GHG-related obligations. In the international market, companies, organizations and governments buy offsets to comply with caps on the total amount of emissions they are allowed to emit. These caps are set by international bodies on climate change. The voluntary carbon offset market allows individuals, companies and organizations to offset their greenhouse gas emissions from transportation, electricity and other uses. This market operates without caps outlining the limits on carbon emissions.
