< 1997,p. 87.

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1 VARIETY OF GREENHOUSE GAS EMISSIONS CREDITS Ilze Prūse University of Latvia, Faculty of Economics and Management Tel.: , During the recent years greenhouse gas emissions credits (hereinafter GHG credits), also known as carbon credits, have become a widely used commodity and the variety of GHG credits year by year has gradually increased. The number of traded GHG credits in 2009 was more than 8 billions credits and the value of transactions of GHG credits in 2009 reached 94 billions. The goal of this paper is to research the characteristics of GHG credits which ensure their currency, since that would allow improving of the efficiency of the use of GHG credits. At the beginning of this paper the meaning of GHG credits within tradable permits systems is explained. The classification and main characteristics of GHG credits are discussed and the classification of GHG credits according to their particular characteristics is suggested. Key related information and comparison of currently used GHG credits is provided, including such GHG credits as assigned amount units (AAUs), certified emission reductions (CERs), emission reduction units (ERUs), European allowances (EUAs), Regional Greenhouse Gas Initiative CO 2 allowances (RCA), removal units (RMUs) and verified emission reductions (VERs). It is concluded that although it is necessary to further research characteristics of GHG credits in relation to their volumes, GHG credits as tradable permits are an integrated part of tradable permits systems and therefore their currency is closely linked to the details and scope of tradable permits systems within which they have been issued as well as the number and characteristics of other tradable permits systems where they are traded. Keywords: carbon credits, greenhouse gases (GHGs), greenhouse gas emissions credits, tradable permits, tradable permits systems Introduction Greenhouse gases (GHGs) since the adoption of the Kyoto Protocol to the United Nations Framework Convention on Climate Change (hereinafter Kyoto Protocol) is a term used to refer to the six gases that are increasing greenhouse effect, i.e. carbon dioxide (CO 2 ), methane (CH 4 ), nitrous oxide (N 2 O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF 6 ). However important to recognize that GHGs are not only chemicals. GHGs nowadays in fact are also the basis for the new type of assets GHG emissions credits (hereinafter GHG credits), also known as carbon credits, which during the recent years have become a widely used commodity. The number of traded GHG credits in 2009 was more than 8 billions credits and the value of transactions of GHG credits in 2009 reached 94 billions. 1 Moreover, the variety of GHG credits year by year has gradually increased and currently every day around the world already more than five different GHG credits are used. The goal of this paper is to research the characteristics of GHG credits which ensure their currency. The results of this research would allow improving of the efficiency of the use of GHG credits as economical instruments. At the beginning of this paper the meaning of GHG credits within tradable permits systems is explained. Further classification and characteristics of GHG credits are discussed. Subsequently an overview of currently used GHG credits is provided, including discussion on GHG credits differences and similarities, interconnectedness as well as currency. But at the end of the paper conclusions are drawn with respect to the main characteristics of GHG credits ensuring their currency. Greenhouse Gas Emissions Credits as Tradable Permits GHG credits in principle are tradable permits. A.D. Ellerman notes that tradable permit is a tradable right to a common poll resource. 2 Single tradable permit denotes a certain right with respect to a certain amount of certain asset, for example, it might mean a certain right with respect to a certain amount of GHGs. Tradable permits are the main element of tradable permits systems. The concept of tradable permits systems first was formulated at the end of 1960-ies by T. Crocker & J. Dales 3 and later formalized by W. D. Montgomery & T. H. Titenberg. 4 According to the classification of instruments facilitating sustainable development by A. Markandya, P. Harou L. G. Bellu & V.Cistulli, tradable permits system is an economical 1 Point Carbon, Global carbon market volumes and values in 2009, viewed 8 March 2010, < 2 A. D. Ellerman A Note on Tradable Permits, Environmental & Resources Economics, 2005 (31), p N.D. Hanley, J.F. Shogren & B. White, Environmental Economics in Theory and Practice, Macmillian Press, United Kingdom, 1997,p C. Helm, Economic Theories of Environmental Cooperation, Edward Elgar, United Kingdom, 2000, p

2 instrument related with the creation of new market. 5 Whereas according to the classification by N. D. Hanley, J. F. Shogren & B.White, tradable permit system is an instrument for rationalization of volumes. 6 A principal theorem of environmental economics demonstrates that, under specific conditions, an appropriately defined tradable permits system can minimize the cost of reaching a predefined environmental target. 78 In a perfectly competitive market, permits will flow towards their highest-valued use. Whereas those that would receive lower value from using the permits (owing to lower abatement costs, for example) have an incentive to trade them to someone who would value them more. 9 In addition, important to note that many conditions that are essential to the efficient operation of tradable permits system are directly related to the tradable permits in particular. According to I.Prūse, the most essential conditions for the efficient operation of tradable permits system are optimal number of total tradable permits, for market suitable and as much as possible fair mechanism of initial allocation of tradable permits, as much as possible low prices for the transactions of tradable permits, optimal period of validity of tradable permits, condition that profits gained from the trade of tradable permits is owned by respective sellers, competency and proper motivation of tradable permits market participants, comprehensive and progressive control and supervision of the tradable permits market. 10 Classification and Characteristics of Tradable Permits Classification of tradable permits mostly is attached to the field of their application. For example, R. A. Kraemer, E. Kampa and E. Interwies discussing the role of tradable permits in water pollution control proposes to classify them in three major types related to water management (tradable water abstraction rights, tradable permits to water based resources, tradable discharge permits) 11. However such approach can not be used universally. Presently the only known universal classification is defined by A. D. Ellerman. According to A.D.Ellerman, the classification of tradable permits must be directly linked to the following three general forms of tradable permit systems 12 : Credit trading (Facility that does more than required to meet the conditions of its permit may get credit for its extra effort and that credit can be transferred to another facility that is thereby excused from fulfilling the condition of its permit in like amount); Averaging (Automatic credit trading in which parties that do better than required in their permits automatically receive credits that can be used by others without any question from the regulator whether the firm generating the credit would have reduced emissions anyway); Allowance trading (Also known as cap-and-trade, so called because of the absolute cap on emissions and the ability to trade emissions under the cap.). Hence principal types of tradable permits accordingly are credits, automatic credits and allowances (shown in Figure No.1). Figure 1. Principal Types of Tradable Permits However important to note that the possibilities for the application of the classification proposed by A. D. Ellerman are very narrow. This classification allows to learn only about the mechanism where tradable 5 A. Markandya, P. Harou, L. G. Bellú & V. Cistulli, Environmental Economics for Sustainable Growth, Edward Elgar & The World Bank, United Kingdom, 2002, pp N. D. Hanley, J. F. Shogren & B. White, p W. J. Baumol & W. E. Oates, The Use of Standards and Prices for Protection of the Environment, Swedish Journal of Economics, vol. 73, no.1, 1971, pp C. Helm, pp T. Titenberg The Tradable-Permits Approach to Protecting the Commons: Lessons for Climate Change, Oxford Review of Economic Policy, Vol. 19, No , p I. Prūse, The Management Model of the Proceeds Gained in the Emission Trading in the Conditions of Latvia s Economic Crisis, Scientific Papers of the University of Latvia: Economics. Business Administration, Vol. 743, 2009, p R. A. Kraemer, E. Kampa & E. Interwies, The Role of Tradable Permits in Water Pollution Control, Inter-American Development Bank, 2004, pp A. D. Ellerman, pp

3 permits are issued and used, however it does not describe the tradable permits. Therefore the author of this paper would like to suggest the main criteria for the classification of tradable permits according to their characteristics (shown in Figure No.2). Figure 2. Main Criteria for the Classification of Tradable Permits According to their Characteristics Most significant characteristic of the tradable permit is its content, i.e. the product or substance it denotes. Although there are some examples of tradable products permits currently more known are tradable permits denoting emissions of certain substances, including, mono-nitrogen oxides (NOx), sulphur dioxide (SO 2 ) and especially GHG. Tradable permits denoting the amounts of NOx emissions are common, for example, in The Netherlands and The United States of America. 13,14 Tradable permits denoting the amounts of SO 2 emissions are used, for example, in the United States. 15 But tradable permits denoting the amounts of GHG emissions due to global efforts to mitigate the climate change nowadays are well known almost in every country. Other important characteristic of tradable permit is its primary mandatory users, i.e. users who are using tradable permits in order to fulfil their legal commitments, e.g. limits of emissions allowed, and who for that reason primary must use exactly the particular tradable permits. Most frequently primary mandatory users are companies. But there are also some tradable permits whose primary mandatory users are governments. Scope of trading with respect to the tradable permit characterises the vastness of its trading. Scope of trading can be measured both according to the numbers of market participants as well as according to the numbers of markets or levels of markets where permit can be traded. Mostly scope of trading is described according to the levels of markets and accordingly there are nationally, regionally (national or international) and internationally tradable permits. Nationally tradable permits can be traded within one country. Regionally national tradable permits can be traded only within certain regions of one country and regionally international tradable permits can be traded within certain region of countries. ly tradable permits can be traded internationally, without limitations with respect to eligible regions. Significant characteristic of tradable permit is also the period of validity. Period of validity usually vary from one to several years. It is possible to subdivide short-term tradable permits, long-term tradable permits and unlimited-term tradable permits. R.Hahn and R.Noll note that tradable permits must be storable thus allowing preserving their value till the moment when their sale or purchase becomes beneficial. 16 Referring to the similarities with financial assets, short-term tradable permits are those which period of 13 The Netherlands Ministry of Housing, Spatial Planning and the Environment, The Dutch emissions trading program for NOx, viewed 8 March 2010, < 14 United States Environmental Protection Agency, NOx Trading Programs, viewed 8 March 2010, < 15 United States Environmental Protection Agency, SO2 Reductions and Allowance Trading Under the Acid Rain Program, viewed 8 March 2010, < 16 R. W. Hahn & R. G. Noll, Environmental Markets in the Year 2000, Journal of Risk and Uncertainty, vol. 3, no. 4, 1990, p

4 validity is up to one year, long-term tradable permits are those which period of validity is more than one year, but unlimited-term tradable permits does not have a constraint with regard to the period of their validity. Comparison of Greenhouse Gas Emissions Credits It is possible to identify more than ten different GHG credits, however some of them have already ceased to exist (for example, GHG credits within United Kingdom s GHG Trading Scheme 17, Norwegian Emissions Trading System 18, Danish CO 2 Emission Trading Scheme 19 etc.), while some are still not fully developed (for example, GHG credits within Japan s Emissions Trading System 20, United States Federal Emissions Trading System 21, The New Zealand Emissions Trading Scheme 22, Australia s Carbon Pollution Reduction Scheme 23 etc.). Main reason why some of the formerly created GHG credits have ceased to exist is the closure or principal reorganisation of the tradable permit systems which was their only scope of trading. List of presently operating GHG tradable permits systems and corresponding tradable permits is shown in Table No.1. Table 1. Summary about Presently Operating GHG Tradable Permits Systems 24,25,26,27,28,29,30 Designation Abbreviation Operation Allowances Credits First Year of Tradable Permits* Chicago Climate Exchange CCX C-VERs European Union Greenhouse Gas Emission Trading System EU ETS 2005 EUAs CDRs, ERUs Emissions CDRs, ERUs, IET 2008 AAUs Trading RMUs Japan s Voluntary Emissions Trading Scheme JVETS 2005 AAUs CERs, ERUs, RMUs New South Wales Greenhouse NSW Gas Reduction Scheme GGAS N-VERs Regional Greenhouse Gas Initiative RGGI 2009 RCA R-VERs Swiss Emissions Trading Scheme SETS 2008 AAUs CDRs, ERUs * Full designations of tradable permits are shown in Table No The Stationery Office, The UK Emissions Trading Scheme: A New Way to Combat Climate Change Report by the Comptroller and Auditor General HC 517 Session : 21 April pp Norwegian Ministry of the Environment, The Norwegian Government accepts to include the EU Emissions Trading Directive in the EEA agreement, viewed 8 March 2010, < > 19 S. L. Pedersen, The Danish CO2 Emissions Trading System, Review of European Community& Environmental Law, vol. 9 no. 3, 2003, pp Japan s Ministry of the Environment, The Current Status of the Emissions Trading Scheme in Japan, viewed 8 March 2010, < 21 United States Environmental Protection Agency, Economic Analysis, viewed 8 March 2010, < 22 The New Zealand s Government, The New Zealand Emissions Trading Scheme, viewed 8 March 2010, < 23 Australian Government, Carbon Pollution Reduction Scheme, viewed 8 March 2010, < 24 Chicago Climate Exchange, Exchange Overview, viewed 8 March 2010, < 25 European Commission, Emission Trading System (EU ETS), viewed 8 March 2010, < 26 United Nations Framework Convention on Climate Change, Emissions Trading, viewed 8 March 2010, < 27 Japan s Ministry of the Environment, Japan s Voluntary Emissions Trading Scheme (JVETS), viewed 8 March 2010, < 28 NSW Greenhouse Gas Reduction Scheme Administrator, Greenhouse Gas Reductions Scheme, viewed 8 March 2010, < 29 Regional Greenhouse Gas Initiative, About RGGI, viewed 8 March 2010, < 30 Federal Office of the Environment, Emissions trading in Switzerland, viewed 8 March 2010, < 325

5 Some of GHG tradable permits systems (hereinafter emission trading schemes, ETS) have been in operation since 2003 or 2005, but most of them since 2008 or later, which most likely is because the widest of them, i.e. IET, came into full operation in Tradable permits which are in almost all ETS and thus serve as their link are CDRs and ERUs (they are accepted at four of five ETS). However important that also AAUs are widely used (they are used in three of five ETS) and likely reason for that is that most of presently operating ETS are developed in order to fulfil the targets set out by the Kyoto Protocol and targets are to be reached by using AAUs. Summary about main characteristics of all presently used GHG credits is shown in Table No.2. Assigned Amount Unit Certified Emission Reduction Emission Reduction Unit European Allowance Regional Greenhouse Gas Initiative CO 2 allowance AAU CER ERU EUA RCA allowance credit credit allowance allowance CO 2 Governments, (companies) Companies, governments Companies, governments Companies Companies Scope of Trading ly Regional Nationally Regional Period of Validity Table 2. Summary about Main Characteristics of Presently Used GHG credits** Primary Abbreviation Type Principal Designation Content Mandatory Users Companies, Removal Unit RMU credit governments Verified VER,, term, Emission int.al J-VER, credit Companies nationally unlimited- Reduction R-VER etc. regional * CO 2 equivalent is calculated using global warming potentials defined by decision 2/CP.3 adopted by the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol on its Third Session, held at Kyoto from 1 to 11 December ** Sources of data for the table are indicated further in the text when each of GHG credits is described in more details. Every GHG credit, except RCA, is equal to one metric tonne of CO 2 equivalent and every GHG credit, except VER, which can be tradable also for unlimited-term, is long-term tradable permit. Three of GHG credits are issued as allowances (AAUs, EUAs and RCAs) and four as credits (CERs, ERUs, RMUs and VERs). Five from eight GHG credits are designed for the international trading, whereas there is one tradable permit for the internationally regional trade, one for nationally regional trade and one for national trade. Primary users of all GHG credits are companies, except AAUs which has special exclusive conditions for companies, but governments are primary users of four from eight GHG credits, i.e. governments are primary users of all internationally tradable GHG credits. More detailed information on each of GHG credits is provided after Figure No.3 where relative shares of traded volumes of each GHG credit are illustrated. Decision 9/CMP.1 Guidelines for the Implementation of Article 6 of the Kyoto Protocol, Report of the Conference of the Parties Serving as the Meeting of the Parties to the Kyoto Protocol on Its First Session, Held at Montreal from 28 November to 10 December Addendum. Part Two: Action Taken by the Conference of the Parties Serving as the Meeting of the Parties to the Kyoto Protocol at its First Session UNFCCC Available: FCCC/KP/CMP/2005/8/Add

6 Figure 3. Relative Shares of Traded Volumes of GHG Credits in The largest share of GHG credits market (64.3%) belongs to EUAs. Second most traded GHG credits are CDRs (30.4%). But the market shares of the rest of GHG credits are less than 5%. The relative shares of the values of traded GHG credits are similar. However considering these data, important to keep in mind that the IET started to fully operate in 2008, but RGGI came into full operation only in 2009 (all accounted transactions of RCAs supposedly are forwards). The assigned amount unit or AAU is an allowance equal to one metric tonne of CO 2 equivalent and it is the basis of IET. AAUs are issued to parties with commitments under the Kyoto Protocol (Annex B Parties), i.e. governments. AAUs are traded internationally. Trading takes place between governments, except Japan and Switzerland which has delegated these rights to their enterprises. First AAUs were issued in 2008 and they were issued for the period of , however current they are bankable also for later years. For the purposes of running national or regionally national ETS (for example, EU ETS) as well as to ensure operation of certain credit trading mechanisms (for example, Joint implementation, JI), AAUs can be converted into other GHG credits, for example, respectively EUAs and ERUs. Hence trading is not the only activity where AAUs are used. 33,34,35,36,37 But as to traded amounts of AAUs besides the fact that IET came into operation only in 2008 and therefore market players most likely in some sense were not yet prepared for the AAUs, rather low amount of traded AAUs within 2008 can be explained by a fact that first AAUs were issued for the period of four years thus giving market participants quite significant flexibility with their trading strategies. The certified emission reduction or CER is a credit equal to one metric tonne of CO 2 equivalent. It can be traded within IET as well as other ETS, for example, JVETS and SETS. They are traded between governments as well as companies. CERs are issued according to the Kyoto Protocol and they can be earned within projects called Clean Development Mechanisms (CDMs). Projects which are eligible for CDM are defined in the regulations related to Kyoto Protocol. General requirement for CDM project project must ensure additional emission reductions in developing country. The term of validity of currently issued CDRs is It is anticipated that by the end of 2012 more than 2.9 billion CERs will be issued. 38,39 The largest advantage of CER and reason of its traded considerable amounts probably is the fact that it is not strictly linked to any ETS, instead it is recognized by many. 32 K. Capoor & P. Ambrossi, State and Trends of the Carbon Markets, The World Bank, Washington, D.C Federal Office of the Environment, Emissions trading in Switzerland, viewed 8 March 2010, < 34 Japan s Ministry of the Environment, Japan s Voluntary Emissions Trading Scheme (JVETS), viewed 8 March 2010, < 35 Decision 18/CP.7 Modalities, Rules and Guidelines for Emissions Trading Under Article 17 of the Kyoto Protocol, Report of the Conference of the Parties on Its Seventh Session, Held at Marrakesh from 29 October to 10 November Addendum. Part Two: Action Taken by the Conference of the Parties. Vol. II. UNFCCC Available: FCCC/CP /Add United Nations Framework Convention on Climate Change, Emissions Trading, viewed 8 March 2010, < 37 Decision 13/CMP.1 Modalities for the Accounting of Assigned Amount Units Under Article 7, paragraph 4, of the Kyoto Protocol, Report of the Conference of the Parties Serving as the Meeting of the Parties to the Kyoto Protocol on Its First Session, Held at Montreal from 28 November to 10 December Addendum. Part Two: Action Taken by the Conference of the Parties Serving as the Meeting of the Parties to the Kyoto Protocol at its First Session UNFCCC Available: FCCC/KP/CMP/2005/8/Add United Nations Framework Convention on Climate Change, Clean Development Mechanism (CDM), viewed 8 March 2010, < 39 Decision 3/CMP.1 Modalities and procedures for a clean development mechanism as defined in Article 12 of the Kyoto Protocol, Report of the Conference of the Parties Serving as the Meeting of the Parties to the Kyoto Protocol on Its First Session, Held at Montreal from 28 November to 10 December Addendum. Part Two: Action Taken by the Conference of the Parties Serving as the Meeting of the Parties to the Kyoto Protocol at its First Session UNFCCC Available: FCCC/KP/CMP/2005/8/Add

7 The Emission Reduction Unit or ERU is a credit equal to one metric tonne of CO 2 equivalent. In general it is very similar to CDRs, int. al. conditions of trading, term of validity etc., however there is one major difference ERUs can be earned within projects called Joint Implementation (JIs) and general requirement for JI project is that project must ensure additional emission reductions in a country which is listed in Annex B of the Kyoto Protocol, i.e. developed country. 40,41 Most likely reason why traded amount of ERUs are comperatively very small is the fact that many host countries of JI projects overlap with EU ETS as well as because many host countries of JI projects are concentrating on their participation in IET. The European Allowance or EUA is an allowance to emit one tonne of carbon dioxide equivalent during a specified period. EUAs by the European Commission and national governments are allocated and auctioned to companies within certain sectors of industries (in total ~ more than installations in 27 countries). Primary users of EUAs are European Union s as well as Norway s (since 2008) companies. First EUAs were issued for the period of (on average million EUA per year), next for (on average million EUA per year), but afterwards there will be EUAs for ,43,44 Most likely reasons why EUAs are being the most traded GHG credits in the world are the facts that EU ETS has been in operation already since 2005 as well as the fact that there is a very large number of EU ETS market participants and EUAs and therefore there is a high liquidity of the EUAs which in addition attracts different mediators and increases the numbers of trasactions. The Regional Greenhouse Gas Initiative CO2 allowance or RCA is an allowance to emit one tonne of CO 2. RCA are issued by states participating in the RGGI and auctioned to the companies which are covered under the RGGI. The period of validity of RCA depends on the time of its auction, for example, for the currently auctioned RCAs its But as to traded amounts of RCAs besides the fact that RGGI came into operation only in 2009 and therefore market players in some sense were not yet prepared for the RCAs, most likely reasons why the amounts of currently traded RCAs are very small are the fact that RCAs are allocated through auctions and therefore everyone can purchase as many RCAs as it needs and they are usable only in RGGI. The removal unit or RMU is a credit equal to one metric tonne of CO 2 equivalent. In general it is very similar to CDRs, int. al. conditions of trading, term of validity etc., however there is one major difference RMUs can be earned only within land use, land-use change and forestry (LULUCF) activities such as reforestation. 46,47 The main reason why the amounts of traded RMUs are very small probably is the general perception that reductions of GHG are more important than removals of RMU. But second important factor could be the fact that LLUCF project s are not requiring significant investments in technologies and therefore project developers are considering that these projects has comparatively lower margin of profitability (in comparison to, for example, CDM projects). The Verified Emission Reduction or VER is a credit equal to one metric tonne of CO 2 equivalent. VERs are similar to CERs and ERUs, however they are not issued according to the Kyoto Protocol and its related regulations. VERs are related to voluntary carbon offsets and they are issued according to voluntary developed standards, such as ISO 14, 065, the Voluntary Carbon Standard, the GHG Protocol, VER+ and the Gold Standard etc. A separate system for the issuance of VERs has been created, for example, in Japan Japanese Verified Emissions Reduction Certification Scheme (the abbreviation of VERs issued according to the Japanese system is J-VERs). Similar system has been also created within CCX, NSW GGAS and RGGI, but some VERs are issued even outside the scope of ETS. Primary mandatory users of VERs are companies, however on voluntary basis individuals may participate as well. 48,49,50,51 The main reason why the amounts of traded VERs 40 United Nations Framework Convention on Climate Change, Joint Implementation (JI), viewed 8 March 2010, < 41 Decision 13/CMP.1 Modalities for the Accounting of Assigned Amount Units Under Article 7, paragraph 4, of the Kyoto Protocol, Report of the Conference of the Parties Serving as the Meeting of the Parties to the Kyoto Protocol on Its First Session, Held at Montreal from 28 November to 10 December Addendum. Part Two: Action Taken by the Conference of the Parties Serving as the Meeting of the Parties to the Kyoto Protocol at its First Session UNFCCC Available: FCCC/KP/CMP/2005/8/Add.2. Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 Establishing a Scheme for Greenhouse Gas Emission Allowance Trading Within the Community and Amending Council Directive 96/61/EC, OJ L 275, , p.32 European Commission, EU Action Against Climate Change: The EU Emissions Trading Scheme, European Communities, Belgium, European Commission, Emission Trading System (EU ETS), viewed 8 March 2010, < 45 Regional Greenhouse Gas Initiative, About RGGI, viewed 8 March 2010, < 46 United Nations Framework Convention on Climate Change, Emissions Trading, viewed 8 March 2010, < 47 Decision 13/CMP.1 Modalities for the Accounting of Assigned Amount Units Under Article 7, paragraph 4, of the Kyoto Protocol, Report of the Conference of the Parties Serving as the Meeting of the Parties to the Kyoto Protocol on Its First Session, Held at Montreal from 28 November to 10 December Addendum. Part Two: Action Taken by the Conference of the Parties Serving as the Meeting of the Parties to the Kyoto Protocol at its First Session UNFCCC Available: FCCC/KP/CMP/2005/8/Add Japan s Ministry of the Environment, Offseting Credit (J-VER), viewed 8 March 2010, < 328

8 are comparatively small is a fact that these GHG credits are part of voluntary mechanisms and therefore their demand and supply very much depends on the society s and companies general awareness on dangers and opportunities related to climate change as well as willingness to take an initiative to act and get involved. Conclusions In order to precisely identify the main characteristics of GHG credits ensuring their currency it is necessary to further systematically to research their characteristics in relation to their both traded and used volumes, however already the analysis performed within this paper has shown that GHG credits as tradable permits are an integrated part of the tradable permits systems and therefore their currency is closely linked to the details and scope of the tradable permits systems within which they have been issued as well as the number and characteristics of other tradable permits systems where they are traded. References 1. Australian Government, Carbon Pollution Reduction Scheme, viewed 8 March 2010, < 2. Baumol W. J. & Oates W. E., The Use of Standards and Prices for Protection of the Environment, Swedish Journal of Economics, vol. 73, no.1, 1971, pp Capoor K. & Ambrossi P., State and Trends of the Carbon Markets, The World Bank, Washington, D.C Chichago Climate Exchange, Exchange Overview, viewed 8 March 2010, < 5. Decision 18/CP.7 Modalities, Rules and Guidelines for Emissions Trading Under Article 17 of the Kyoto Protocol, Report of the Conference of the Parties on Its Seventh Session, Held at Marrakesh from 29 October to 10 November Addendum. Part Two: Action Taken by the Conference of the Parties. Vol. II. UNFCCC Available: FCCC/CP /Add Decision 3/CMP.1 Modalities and procedures for a clean development mechanism as defined in Article 12 of the Kyoto Protocol, Report of the Conference of the Parties Serving as the Meeting of the Parties to the Kyoto Protocol on Its First Session, Held at Montreal from 28 November to 10 December Addendum. Part Two: Action Taken by the Conference of the Parties Serving as the Meeting of the Parties to the Kyoto Protocol at its First Session UNFCCC Available: FCCC/KP/CMP/2005/8/Add Decision 9/CMP.1 Guidelines for the Implementation of Article 6 of the Kyoto Protocol, Report of the Conference of the Parties Serving as the Meeting of the Parties to the Kyoto Protocol on Its First Session, Held at Montreal from 28 November to 10 December Addendum. Part Two: Action Taken by the Conference of the Parties Serving as the Meeting of the Parties to the Kyoto Protocol at its First SessionUNFCCC Available: FCCC/KP/CMP/2005/8/Add Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 Establishing a Scheme for Greenhouse Gas Emission Allowance Trading Within the Community and Amending Council Directive 96/61/EC, OJ L 275, , p Ellerman A. D. A Note on Tradable Permits, Environmental & Resources Economics, 2005 (31), p European Commission, Emission Trading System (EU ETS), viewed 8 March 2010, < 11. European Commission, EU Action Against Climate Change: The EU Emissions Trading Scheme, European Communities, Belgium, Federal Office of the Environment, Emissions trading in Switzerland, viewed 8 March 2010, < 13. Ginter J. J. C., The Alaska Community Development Quota Fisheries Management Program, Ocean and Coastal Management, vol. 28, no. 1 3, 1995, pp Hanley N. D., Shogren J. F. & White B., Environmental Economics in Theory and Practice, Macmillian Press, United Kingdom, Helm C., Economic Theories of Environmental Cooperation, Edward Elgar, United Kingdom, Jaffe J. & Stavins R. N., Linkage of Tradable Permit Systems in Climate Policy Architecture Discussion Paper 08-07, The Harward Project on Climate Agreements, Harward Kennedy School, 2008, p Japan s Ministry of the Environment, Japan s Voluntary Emissions Trading Scheme (JVETS), viewed 8 March 2010, < 18. Japan s Ministry of the Environment, Offseting Credit (J-VER), viewed 8 March 2010, < 49 NSW Greenhouse Gas Reduction Scheme Administrator, Greenhouse Gas Reductions Scheme, viewed 8 March 2010, < 50 Chicago Climate Exchange, Exchange Overview, viewed 8 March 2010, < 51 TÜV SÜD, VER+ :A robust Standard for Verified Emission Reductions (Criteria Catalogue), viewed 8 March 2010, < 329

9 19. Kraemer R. A., Kampa E. & Interwies E., The Role of Tradable Permits in Water Pollution Control, Inter- American Development Bank, 2004, pp Markandya A., Harou P., Bellú L. G. & Cistulli V., Environmental Economics for Sustainable Growth, Edward Elgar & The World Bank, United Kingdom, Norwegian Ministry of the Environment, The Norwegian Government accepts to include the EU Emissions Trading Directive in the EEA agreement, viewed 8 March 2010, < 22. NSW Greenhouse Gas Reduction Scheme Administrator, Greenhouse Gas Reductions Scheme, viewed 8 March 2010, < 23. Pedersen S. L., The Danish CO2 Emissions Trading System, Review of European Community& Environmental Law, vol. 9 no. 3, 2003, pp Point Carbon, Global carbon market volumes and values in 2009, viewed 8 March 2010, < 25. Prūse I., The Management Model of the Proceeds Gained in the Emission Trading in the Conditions of Latvia s Economic Crisis, Scientific Papers of the University of Latvia: Economics. Business Administration, Vol. 743, 2009, pp R. W. Hahn & R. G. Noll, Environmental Markets in the Year 2000, Journal of Risk and Uncertainty, vol. 3, no. 4, 1990, pp Regional Greenhouse Gas Initiative, About RGGI, viewed 8 March 2010, < 28. The Netherlands Ministry of Housing, Spatial Planning and the Environment, The Dutch emissions trading program for NOx, viewed 8 March 2010, < 29. The New Zealand s Government, The New Zealand Emissions Trading Scheme, viewed 8 March 2010, < 30. Titenberg T. The Tradable-Permits Approach to Protecting the Commons: Lessons for Climate Change, Oxford Review of Economic Policy, Vol. 19, No , pp TÜV SÜD, VER+ :A robust Standard for Verified Emission Reductions (Criteria Catalogue), viewed 8 March 2010, < United Nations Framework Convention on Climate Change, Clean Development Mechanism (CDM), viewed 8 March 2010, < 33. United Nations Framework Convention on Climate Change, Emissions Trading, viewed 8 March 2010, < 34. United Nations Framework Convention on Climate Change, Joint Implementation (JI), viewed 8 March 2010, < 35. United States Environmental Protection Agency, Economic Analysis, viewed 8 March 2010, < 36. United States Environmental Protection Agency, NOx Trading Programs, viewed 8 March 2010, < 37. United States Environmental Protection Agency, SO 2 Reductions and Allowance Trading Under the Acid Rain Program, viewed 8 March 2010, < 330