It is now almost universally accepted by the international scientific community, and increasingly so by the general public, that climate change is real, accelerating, due to human activity, and must be addressed in the immediate term if major adverse effects are to be avoided in the future.

Mechanisms for financing activities which combat climate change by reducing the net emissions of carbon dioxide and other greenhouse gases (GHGs) are still in their early stages of development, but have now reached a scale at which it is clear that they are here to stay. Global trade in 'carbon credits' increased from $11bn in 2005 to $64bn in 2007. And whilst future values of credits cannot be predicted with certainty, in an environment of growing concern about fossil fuel supply and increasing focus of policy-makers on climate change mitigation, it is expected that the market will continue to grow.

The principal global framework for reducing GHG emissions is the Kyoto Protocol, which gives 'industrialised' countries firm targets for reducing emissions within a specific timeframe. A component of the Kyoto Protocol, called the Clean Development Mechanism (CDM), allows these countries to meet a certain proportion of their targets by financing projects which will generate emissions reductions in 'non-industrialised' countries which do not have targets of their own.

Projects may be 'sink' projects, i.e. activities which cause the absorption and storage of carbon dioxide from the atmosphere, such as reforestation, or 'source' projects, which reduce net emissions of greenhouse gases into the atmosphere. The majority of the latter reduce the consumption of fossil fuels either through demand-side energy efficiency measures or through substitution with more efficient or wholly renewable fuels such as solar, wind or biofuels.

Carbon credits under the CDM are issued in standardised units called Certified Emission Reductions (CERs), where 1 CER represents a net reduction of 1 tonne of carbon dioxide (or its equivalent in overall global warming potential for other greenhouse gases).

The process for approval of projects and issuing of CERs is tightly regulated to ensure that credits reflect genuine and quantifiable reductions in net GHG emissions, and do not harm the local environment, society or economy. The process is governed by the Executive Board of the United Nations Framework Convention on Climate Change (UNFCCC), and all projects must be audited by approved third parties to ensure that these criteria are met both in initial project design and ongoing implementation.