This is only my own overview - the following is not very accurate, but I hope it will help you. Carbon dioxide (CO2) is a greenhouse gas which is produced through burning fossil-based fuel. One of the purposes of the Kyoto agreement is to persuade countries to agree to a reduction of CO2 emissions over a period of time (up to 2012). To do this they are trying to commoditise, or place a cash value on, CO2 emissions, which they hope will force governments and manufacturers to take into account, and be responsible for, this 'externality' of production. To begin with, signatory countries were issued with 'carbon credits' representing their emissions of CO2. The more credits you have, the more you are allowed to release into the atmosphere. These credits can be traded. If your production efficiency improves and you release less CO2, you can sell your surplus credits to someone else. If you want to expand and emit more CO2 you can buy credits from someone else. As far as I know, the idea is that eventually all manufacturers will have to have credits to release CO2 into the atmosphere; over time, fewer credits will be issued and they will become more expensive, so persuading organisations to use more efficient methods and reduce emissions. There are numerous problems with the plan. Here are a few. It is thought that too many credits were issued to begin with, so no immediate or medium-term benefit; not every country has agreed to sign up - notably USA; it is also very difficult to measure the actual emissions. Emissions cuts abroad. CO2 emissions is a global problem - it has an effect everywhere regardless of where they originated. Your text is saying that industrialised countries can earn the right to release more CO2 themselves if they pay for a reduction in emissions in another, less well developed country, resulting in no net increase in CO2 release. This has an additional benefit of transferring technical expertise at the same time.

Bill is right. The Kyoto trading mechanism is a part of the Kyoto protocol. It puts up rules how to trade permissions to produce carbon dioxide (the permission is traded, not the co2). Example: Germany and India are allowed to produce a certain amount of co2 per year. Now consider Germany produces more co2 than allowed. Germany will have to take measures to lower the output of co2 -- or: Germany can buy permissions to produce co2 from other countries, eg India, that produce less co2 than allowed. Germany could even help India to lower it's output of co2 by financing alternative energy production like wind farms and solar panels for India and get back the permission for output of co2 that it helped reduce in India.

Carbon Dioxide has many usage for example soft drink which we drink. refer to http://en.wikipedia.org/wiki/Carbon_dioxide. They pay to produce emission that is damaging the environment.