Compliance Carbon Market (CCM)

What is the Compliance Carbon Market (CCM)?

The compliance carbon market (CCM) serves as a tool for meeting climate targets by offering a financial incentive for companies to reduce their emissions and invest in cleaner technologies. In the EU, the compliance carbon market was established in 2005 through the European Emissions Trading Scheme (EU ETS). Since then, certain industries, like chemical companies, are legally required to purchase carbon credits to offset their emissions. If they fail to lower their emissions, they must buy the necessary credits to comply with their emission limits.

This market operates on the "cap and trade" principle, where governments set a gradually decreasing upper limit (cap) on emissions. Credits are then distributed or auctioned to companies with high emissions. This creates a market for emission rights, allowing efficient companies that reduce emissions to sell carbon credits to others.