The first new mechanism, originally a US proposal, involves trading of

emissions “allowances” (or “budgets”) between countries agreeing to limit

greenhouse gas (GHG) emissions. A country believing its GHG

emissions will be less than allowed in a particular year can earn cash by

selling the “rights” to those emissions to another Party. The second

mechanism (proposed initially by Norway) allows two countries with

emissions limits or two companies within those countries to invest

together in projects reducing net emissions and divide the resulting

emissions reduction credits. The Clean Development Mechanism – a third option -- was adapted

from a Brazilian proposal. It establishes a new portfolio-based approach aggregating voluntary

investments to fund new projects in developing countries. Preferred projects will either reduce GHG

emissions or enhance GHG sinks (e.g., vegetation, which removes CO2 from the atmosphere).

Emissions reduction credits will be divided among investors and hosts.