ABSTRACT
The Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC) strongly emphasizes the role of market mechanisms in reducing atmospheric concentrations of greenhouse gases (GHGs), and has prompted the development of an international trading scheme for carbon credits to this end. Though incorporating many elements of a ‘free-market approach’, the efficient, equitable, and effective functioning of this market will require careful construction of principles and rules that govern market operations and participation, to ensure both reduced net carbon emissions and a minimum of economic dislocation and environmental and social impacts. The agreements reached at COP-6bis and COP-7 in 2001 made significant strides in refining this trading mechanism and designing the rules that are to govern trading of carbon emissions quotas.
