What does the acronym "AAUs" stand for in the context of emissions trading?

The acronym "AAUs" stands for Assigned Amount Units in the context of emissions trading. Assigned Amount Units are a key component of mechanisms that are part of international agreements to reduce greenhouse gas emissions, particularly under the Kyoto Protocol. Each AAU represents the right to emit a certain amount of greenhouse gases, specifically one metric ton of CO2 or its equivalent in other greenhouse gases.

These units are allocated to countries or organizations based on negotiated targets and serve to cap emissions. The trading of AAUs allows countries that have emissions below their assigned limits to sell their excess units to countries that are exceeding their limits, incentivizing reductions in overall emissions.

Understanding the role of Assigned Amount Units is crucial for grasping how emissions trading systems function, as they directly link economic objectives with environmental goals by providing a flexible mechanism for compliance with emission reduction commitments.