THE CARBON CREDITS TRADING PROCESS

On February 16, 2005, the United Nations Framework Convention on Climate Change (UNFCCC) established the Kyoto Protocol, thereby setting standards for mitigating climate change through legal commitments to reduce emissions by participating countries. The Kyoto Protocol has three separate market-based mechanisms that help countries achieve targets.

CLEAN DEVELOPMENT MECHANISM (CDM) PROJECTS

Under the Kyoto Protocol, all CDM projects must undergo validation/certification by a Designated Operating Entity (DOE) – a third-party verifier such as CCT. Validation assesses the design of a CDM project and its estimated reductions before it becomes operational. This validation is required for project acceptance and registration. Registration is a prerequisite for later verification and certification of emission reductions generated by a project. Verification and certification occur after a project is implemented. Upon successful verification, the Designated Operating Entity will determine and certify the emission reductions (CERs) and request the CDM Executive Board to issue certified credits.

JOINT IMPLEMENTATION (JI) PROJECTS

A JI project is a cooperation between two industrialized countries. Certain JI projects are subject to determination and/or verification by an Independent Entity (IE). Determination is an assessment of a project's design documentation, including technology, baseline study, and monitoring plans, and is conducted before the project is implemented. Verification determines the emission reductions or removals generated by a project and verifies compliance with Kyoto Protocol criteria.

EMISSIONS TRADING

Several countries have established emissions trading systems to help them meet Kyoto commitments and reduce emissions cost-efficiently. Most programs require annual emissions and compliance with applicable requirements to be verified by an independent assessor, such as CCT.

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