1. Introduction

The issue of climate change came to the fore as an international concern in the mid 1980s and since then has followed a process of international debate and
agreement on scientific issues, voluntary actions, legally binding greenhouse gas emission targets (Kyoto Protocol), rules for implementing the Kyoto Protocol
and mechanisms such as emission reduction credit trading for reducing emissions (See Appendix B for a brief history).

As of December 31, 2002, 100 countries including Canada, those in the European Union and Japan have ratified the Protocol. Those countries represent 44.3% of 1990 global emissions. Russia and several other countries are expected to ratify in the near future, pushing the percentage over the threshold.

Over the last 10 years most industrial countries, and many individual sectors within their economies, have voluntarily examined ways to reduce or offset their emissions, both within their countries and through international initiatives. (12, 13)

Pilot emission reduction projects have been implemented internationally over the past nine years. By mid 2001, over 150 emission reduction projects had been reported to the United Nations Framework Convention on Climate Change (UNFCCC). (2,3,5,6,8,9,)

These projects typically involve a host country for the project, and a company or country investing in the project. In return for their investment in a project, the host country issues emission reduction credits to the investor. The projects have included: initiation of renewable energy use, energy efficiency  improvement, reforestation, and reduction of agricultural livestock emissions.

Carbon trading exchanges and ventures have been set up in the US and several other countries including the UK, Australia, Denmark, the Netherlands, and on a pilot basis in Canada (Greenhouse Emission Reduction and Trading – GERT and Pilot Emission Reduction and Trading – PERT) (8).

Full disclosure of the price for emission reduction credits in today’s market is limited by the fact that many of the transactions are by contract between buyer and seller, and many of the pricing details remain confidential (5). However, some brokerages have been established and the declared price for 1 tonne CO₂ equivalent (CO₂e) ranges from $US 0.50 to about $US 3.00. Within Canada, the Winnipeg Commodity Exchange announced on Feb. 5th 2003 that they had established a Canadian Climate Exchange to facilitate emission reduction trading in Canada. (14).

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