What do you understand by emission trading?

In order to give parties a certain degree of flexibility in meeting their emission reduction targets, the Kyoto Protocol developed three innovative mechanisms - known as Emissions Trading (the carbon market), Joint Implementation and the Clean Development Mechanism (CDM). These market-based mechanisms allow developed parties to earn and trade emissions credits through projects implemented either in other developed countries or in developing countries, which they can use towards meeting their commitments. These mechanisms help identify lowest-cost opportunities for reducing emissions and attract private sector participation in emission reduction efforts. Developing nations benefit in terms of technology transfer and investment brought about through collaboration with industrialized nations under the CDM.