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What are market mechanisms?

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What are market mechanisms?

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Under the Kyoto Protocol, industrialised countries must achieve emissions targets mainly through national measures such as implementing policies or emissions trading schemes designed to reduce emissions. The Kyoto Protocol introduced three market-based mechanisms: International Emissions Trading, the Clean Development Mechanism (CDM) and Joint Implementation (JI). CDM and JI are ‘project-based’ mechanisms. Emission reduction projects can create credits, or ‘offsets’, which can be used by countries to meet their Kyoto Protocol commitments. The EU Emissions Trading Scheme (EU ETS), which is separate to the Kyoto Protocol, but designed to help the EU achieve its Kyoto Protocol targets, allows operators (large emitters of CO2) to use credits to achieve their compliance obligations. Why are market mechanisms important? A scaled-up international carbon market, which creates financial support for developing countries and promotes cost-effective emission cuts, presents opportunities for busine

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