What is the Kyoto Protocol and emissions trading?
The Kyoto Protocol is a subsidiary legal instrument to the United Nations Framework Convention on Climate Change (UNFCCC). The objective of the UNFCCC is to reduce greenhouse gas concentrations in the atmosphere to a safe level. The Kyoto Protocol sets out (in Annex B) a range of legally binding greenhouse gas emission commitments (targets) for individual developed countries designed to reduce overall greenhouse gas emissions and thus contribute to the UNFCCCs objective. Countries can use flexibility mechanisms, such as emissions trading, to achieve their Kyoto commitments. Emissions trading is a well recognised policy approach for reaching an environmental target at least-cost and with least disruption to the economy. Countries with high greenhouse abatement costs are more likely to buy carbon permits to stay in compliance with their Kyoto commitments than undertake more expensive abatement. Countries with low costs of abatement will undertake more abatement than necessary to meet the
