The Carbon Market
In 1992, the majority of countries worldwide joined an international treaty- the United Nations Framework Convention on Climate Change (UNFCCC). The Convention has the goal of preventing "dangerous" human interference with the climate system, in particular the reduction of greenhouse gas emissions in order to combat global warming.
More recently, a number of nations have approved an addition to the treaty called the Kyoto Protocol. The Kyoto Protocol is more powerful and has assigned mandatory emission limitations for the reduction of greenhouse gas emissions to developed countries. The Protocol entered into force in February 2005 and the mandatory limits currently run from 2008 to 2012.
Through the Kyoto Protocol, the Clean Development Mechanism (CDM) was introduced. Under the CDM, industrialised countries (known as Annex 1 countries) may make investments in specific projects in developing countries that make emissions reductions.
In practice this means that companies such as Pioneer Carbon work with partners on the ground to develop projects which reduce emissions and are able to provide them with financial and technical support.
For further information on the CDM, please visit: http://unfccc.int/2860.php
To develop a project for the CDM, a complex set of rules and procedures must be followed which may mean that a project takes over a year to set up. This means that projects need to be of a certain size to cover their transaction costs and make the carbon investment worthwhile.
Pioneer Carbon also makes sales to the Voluntary Emissions Reduction market. This is similar to the CDM but is for both concerned individuals who want to offset their emissions and for companies with Corporate Social Responsibility requirements. The process of setting up a voluntary project is quicker and more cost effective – but not less rigorous.