Dear all,

I think all of us have heard about Kyoto Protocol, a target for some countries to reduce greenhouse gas to a total of 50% by 2012 at 1990 standard. The protocol is in force from 2005, and these years we hear a lot about carbon trading, and I know many companies are looking for people who have this kind of knowledge. Kyoto Protocol is important not only for environmentalists but also investors who are interested in companies which may generate carbon credits.

Don't want to write as much as you can find in wikipedia, I will break things into points:

Background:
- United Nations Framework Convention on Climate Change (UNFCCC) http://unfccc.int, is the convention for the Kyoto Protocol
- Annex I countries, are those who agreed and committed on Kyoto Protocol, 49 countries and EU, what is called "industrialized countries", no China, no Brazil, no India.
- Certified Emission Reduction (CER), is also known as Carbon Credit, which is equivalent to one metric tone of CO2 or its equivalent greenhouse gas (CO2e).

How to reduce:
- Reduce within the country, like promotion of hybrid cars etc.
- Through Joint Implementation (JI), invest in another Annex I country, like changing coal power plant to gas power plant etc.
- Through Clean Development Mechanism (CDM), invest in developing countries, most likely is China, to earn CERs.

Economic Impact:
- Introduction of carbon trading, since many countries require CER to commit Kyoto Protocol, CER becomes a publicly trading instrument in London.
- Companies which are in forced by government to commit CER quota would invest in business which generate CER
- Companies which have potential to reduce CO2e, will find themselves a new revenue stream of taking CER into their balance sheet

In the nutshell, as Gazprom as an example, companies can reduce carbon dioxide easily would be beneficial and companies which have not considered how to reduce CO2 will be in trouble, maybe air tickets would become less and less affordable in years to come.

Cheers,
Eric