Cap and Trade:

    Aslo known as emissions trading, it is an administrative approach approved in the Kyoto Protocol, aimed to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants, which is sometimes seen as better approach than a direct carbon tax or direct regulation.

    Under the system, countries are permitted to use a trading system to help meet their emissions targets. In principle, a country may allocate permits to individual companies for the emission of a certain quantity of greenhouse gases.

    If permits are only issued to a level equal to or below the assigned amount, then a country should meet its Kyoto commitment (assuming that the measures of its emissions are accurate).

    If a country is incapable of meeting its target, it can buy permits from countries that are under their targets. Similarly, companies within a country that prove more able to reduce their emissions are allowed to trade excess permits to other, more polluting, enterprises.

    The Clean Development Mechanism (CDM)

    It is the entry point for developing countries (non-Annex I) into the Kyoto Protocol on Climate Change. The mechanism was established under Article 12 of the Kyoto Protocol adopted by the Third Conference of the Parties to the UNFCCC on Dec. 11, 1997.

    The dual goals of the CDM are to promote sustainable development in developing countries, and to allow industrialized countries to earn emissions credits from their investments in emission-reducing projects in developing countries. To earn credits under the CDM, the project proponent must prove and have verified that the greenhouse gas emissions reductions are real, measurable and additional to what would have occurred in the absence of the project.

    Annex I and Annex II Countries, and Developing Countries

    Signatories to the UNFCCC are split into three groups: Annex I countries (industrialized countries) , Annex II countries (developed countries which pay for costs of developing countries) and Developing countries.

    Annex I countries agree to reduce their emissions (particularly carbon dioxide) to target levels below their 1990 emissions levels. If they cannot do so, they must buy emission credits or invest in conservation.

    Annex II countries, that have to provide financial resources for the developing countries, are a sub-group of the annex I countries consisting of the OECD members, without those that were with transition economy in 1992.

    Developing countries have no immediate restrictions under the UNFCCC.

    The UNFCCC Conference of Parties (COP)

    The UNFCCC Conference of Parties met for the first time in Berlin, Germany in the spring of 1995. The Bali meeting last month was the 13th COP.

    The COP-15 will be held in Copenhagen, Denmark in 2009. According to Danish Minister for the Environment, Connie Hedegaard, the summit's primary focus will be to obtain an agreement about CO2 and other greenhouse gas reductions after 2012 when the first commitment period under the Kyoto Protocol expires.

    Hoc Working Group (AWG)

    The Kyoto Protocol provides that COP acting as the Meeting of the Parties (CMP) shall initiate consideration of future commitments for Annex I Parties at least seven years before the end of the first commitment period.

    Pursuant to that provision the CMP at its first session held at Montreal from Nov. 28 to Dec. 10 of 2005, established the Ad Hoc Working Group on Further Commitments for Annex I Parties under the Kyoto Protocol (AWG).

    The AWG is mandated to report to each CMP on the status of its work. It aims to complete its work and have its results adopted by the Conference of the Parties at the earliest possible time to ensure that there is no gap between the first and second commitment period of the Kyoto Protocol.

    Intergovernmental Panel on Climate Change (IPCC)

    The Intergovernmental Panel on Climate Change (IPCC) is a scientific body tasked to evaluate the risk of climate change caused by human activity. The panel was established in 1988 by the World Meteorological Organization (WMO) and the United Nations Environment Program (UNEP), two organizations of the United Nations.