Climate change is one of the major challenges the world faces today. The earth is getting warmer and most experts agree that this is the result of human activity – essentially the large scale combustion of fossil fuels and the release of the six recognised Greenhouse Gases (GHGs) – CO2, CH4, N2O, HFCs, PFCs and SF6.

To combat the harmful effects of climate change two major agreements have been adopted by the international community: the United Nations Framework Convention on Climate Change (UNFCCC), 1992 and the Kyoto Protocol, 1997, which entered into force on 16th February 2005. The second of these agreements sets quantified and binding commitments on greenhouse gas emissions for industrialised countries for the period 2008 to 2012 with the aim to reduce their Greenhouse Gas emissions by an overall 5% below 1990 levels. To meet their targets, countries can reduce their domestic emissions and use the so-called “Flexibility Mechanisms” outlined in the Kyoto Protocol – the Clean Development Mechanism, Joint Implementation (JI) and Emissions Trading. These mechanisms provide the framework for trading carbon and have created a functioning Carbon Market.