Carbon Credit Markets

This note discusses issues related to carbon markets: Emissions Trading Approaches (Cap-and-Trade, Baseline-and-Credit, and Offsets), Regulatory Framework (Kyoto Protocol), and two key mechanisms of credits creation, Clean Development Mechanism and Joint Implementation; creation and trading of carbon credits (CERs) (markets such as OTC and organized exchanges such as the Chicago Climate Exchange); examples of investors in the carbon market (carbon funds) and carbon indices established; recent developments in the carbon markets in the United States such as the Regional Greenhouse Gas Initiative and the Western Climate Initiative; and investment considerations and factors affecting pricing in the carbon markets.