Carbon dioxide equivalents may be the most complicated currency on world markets today. A basic exchange works like this: When a company like Gap commits to reducing emissions but cannot, or chooses not to, cut the energy used to move clothes across the globe, it finances someone else's green project. Rather than put $100, say, toward reinventing its shipping system, Gap may spend $20 to plant trees or invest in a clean utility.
If a new power plant is needed in India, carbon investments from Gap and others make it possible to build a more expensive wind farm instead of a coal plant. Win-win, the logic goes: Because carbon emissions are a global problem, it doesn't matter where they are reduced.
The system of carbon trading exploded after the Kyoto Protocol and in 2006 sustained a $30 billion market representing nearly 1.7 billion tons of traded carbon dioxide. The market extends beyond signatories to include companies that participate voluntarily.
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