Unveiling Assigned Amount Unit (AAU) Trades: Current Market Impacts and Prospects for the Future

Abstract

The sale of assigned amount units (AAUs) from countries whose emissions have declined since their baseline year under the Kyoto Protocol has led critics to be skeptical of carbon markets due to the lack of actual emission reductions that occur as a result of these trades. This policy review describes the historical context of AAU trading, current market price and volumes, and environmental and economic impacts of the current AAU trading rules. Options for how to handle current, and prevent the creation of future, surplus AAUs are discussed.

Keywords

• assigned amount unit
• green investment scheme
• hot air
• international emissions trading
• post-2012
• Kyoto Protocol