Emission trading is a regulatory program that allows firms the flexibility to select cost-effective solutions to achieve established environmental goals, which are required to reduce worldwide greenhouse gas emissions to below 1990 levels. Solutions can be achieved by reducing emissions from a discrete emission unit, by reducing emissions from another place within facility, and/or by purchase emission reductions from another facility. International treaties such as the Kyoto Protocol set quotas on the amount of the greenhouse gases countries can produce over the commitment period from 2008 to 2012. Countries, in turn, set quotas on the emissions of businesses. Emissions trading, as set out by the Kyoto Protocol, allows countries that have emission units to spare, namely emissions permitted to them but not used, may ‘‘bank’’ them for use later, or may sell them to countries that are over their quotas. Thus, a new commodity was produced in the form of CERs or removals. Since carbon dioxide and methane are the principal greenhouse gases, emissions trading are simply of trading in carbon. For trading purposes, one credit is considered equivalent to 1 tonne of carbon dioxide emissions. Carbon is now tracked and traded like any other commodity. In the ‘‘carbon market’’, CERs can be exchanged between businesses or bought and sold in international markets at the prevailing market prices.
It is also possible for developed countries within the trading scheme to sponsor carbon projects that provide a reduction in greenhouse gas emissions in other countries, as a way of generating CERs which can be applied to meeting their own emission targets. The Kyoto Protocol allows this through CDM and Joint Implementation projects, in order to provide flexible mechanisms to aid regulated entities in meeting their compliance with their caps. The recipient countries benefit from advanced technology transfer that allows their factories or plants to operate more efficiently, and hence at lower costs and higher profits. The atmosphere benefits because future emissions are lower than they would have been otherwise. The CDM will be overseen by an Executive Board that has already been established and has approved a series of methodologies for large-scale and smallscale projects.
Most wastewater effluent methane avoidance projects have activities that both reduce anthropogenic greenhouse gas emissions by sources and directly emit less than 60,000 tonnes carbon dioxide equivalent per year, and thus are eligible for small-scale CDM projects. An emission analysis based on project activity involving the installation of a granular anaerobic system for the treatment of palm oil mill effluent is illustrated in the following section.