European Union Emissions Trading System is a cornerstone of the European Union's policy to combat climate change and its key tool for reducing industrial greenhouse gas emissions cost-effectively. The first international system for trading greenhouse gas emission allowances, the EU ETS covers more than 11,000 power stations and industrial plants in 31 countries, as well as airlines (see Directive 2009/29/CE of the European Parliament and of the Council).
One form of carbon price creating a market-based system for regulating the emission of greenhouse gases. The quantity of emissions is controlled and the price allowed to vary by the issuing of tradable emission permits. These rights to emit can be traded in a commercial market under an emissions trading scheme.
Clean Development Mechanism. A Kyoto Protocol initiative under which projects set up in developing countries to reduce greenhouse gas emissions generate tradable credits called CERs, the first step towards a global carbon market. These credits can be used by industrialized nations to offset carbon emissions at home and meet their Kyoto reduction targets. The projects include renewable energy generation, reforestation and clean fuels switching.
Joint Implementation. A Kyoto Protocol mechanism which allows developed countries, particularly those in transition to a market economy, to host carbon-reducing projects funded by another developed country. The arrangement sees the credits generated, called ERUs, go to the investor country while the emission allowances (AAUs) of the host country are reduced by the same amount.
European Union Allowances. Tradable emission credits from the EU ETS. Each allowance carries the right to emit one tonne of carbon dioxide.
Certified Emission Reduction. A credit generated under Kyoto's Clean Development Mechanism for the reduction of emissions of greenhouse gases equal to one tonne of CO2-equivalent. They are designed to be used by industrialized countries to count toward their Kyoto targets but can also be used by EU companies and governments as offsets against their emissions under the EU ETS.
Emission Reduction Unit. Tradable credits generated from activities to reduce greenhouse emissions in in industrialized countries, particularly those of the former Soviet-bloc, under the Kyoto Protocol's Joint Implementation mechanism.
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