Under a global climate regime, market-based approaches have the potential to significantly reduce the costs and increase the feasibility of achieving the deep long-term reductions required to address the risks of climate change. [...] This feature has been referred to as the “genius” of Kyoto.3 The carbon constraints derived from the Protocol have resulted in the establishment of national and international trading schemes for private sector entities, such as the EU Emissions Trading Scheme (EU-ETS). [...] Proposals for “greening AAUs” (also known as Green Investment Schemes or GIS) have emerged as a result of a desire on the part of the Annex I buyers (primarily the EU, Canada and Japan) to enhance the political acceptability of purchasing AAUs of certain EIT countries when these are seen as deriving from the decline of their economies subsequent to the Kyoto target base year. [...] In the three and a half years since the adoption of the Marrakech Accords in 2001, the majority of experience with the Kyoto mechanisms has been gained in the CDM. [...] The CDM is the most fully developed of the three mechanisms and the most complex.