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.