#compliancecarbonmarkets #capandtrade #carboncredit
1.What is Compliance Carbon Markets?
2.What are the two main types of trading systems and how do they work? (Cap-and-Trade system, Baseline-and-Credit system)
3.How big is the Compliance Carbon Market? (in comparison with Voluntary Carbon Markets)

Compliance Carbon Markets are marketplaces where emitters can obtain and surrender emission permits or carbon credits in order to meet their legally binding goals. They appeared when countries got legal obligations to decrease their greenhouse gas emissions, meaning when Kyoto protocol entered into force.

Kyoto protocol introduced three market mechanisms: Emissions trading, Clean Development Mechanism (CDM), Joint implementation. Compliance Carbon markets started as implementation of those mechanisms.

Emissions trading operates under Cap-and-Trade system, unit traded is Emission allowance. Clean Development Mechanism and Joint implementation operate as Baseline-and-Credit systems, unit traded is carbon credit.

Important: in baseline and credit system every carbon credit traded has to be backed by emissions reductions which are
- Real (1 mt CO2 equivalent was either prevented from being emitted or removed from the atmosphere)
- Additional (Emissions reductions is an extra effort that goes beyond business as usual)
- Verifiable (Origination is traceable to a concrete project)
- Permanent (Reduced/Avoided emissions will not get back into the atmosphere)

Compliance carbon markets are way much bigger than Voluntary carbon markets (approx 270 Bn $ vs 0.4-1 Bn $), but going further economists predict exponential growth of the latter.

0:00 Intro & questions to be covered
0:41 #1. What is Compliance Carbon Markets?
1:37 #2. What are the two main types of trading systems and how do they work?
2:11 #2.1. Cap-and-Trade system
3:46 #2.2. Baseline-and-Credit system
7:35 #3. How big is the Compliance Carbon Market?
8:02 Executive summary