Definitions
Carbon credit
A carbon credit is a commercial term used to assign a value to a metric tonne of greenhouse gas emissions. Carbon credits are measured in tonnes of carbon dioxide, where 1 credit = 1 tonne of CO2.
These credits need to be authentic, scientifically based and comply with a regulatory body for these to be traded with confidence. Verification is essential.
Kyoto Protocol
The Kyoto Protocol (February 2005) is an international and legally binding agreement to reduce greenhouse gas emissions worldwide, administered and regulated by an international treaty linked to the United Nations Framework Convention on Climate Change (UNFCCC). 180 countries around the world, including Australia, have ratified the Kyoto Protocol.
The major feature of the Kyoto Protocol is to set binding targets to reduce greenhouse gas emissions, including carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride or SF6.
One of the mechanisms within the Kyoto Protocol is an emissions trading framework. It allows for an industrialised country to express its allowed emissions or assigned amounts within the treaty as 'assigned amount units'. As a result, countries that have unused units can then trade them with other countries who have surpassed their own allowances and require additional units. Since carbon dioxide is the principle greenhouse gas, most people now refer to it as trading carbon within a carbon market.