Glossary

Fungibility

Fungibility means the ability to exchange one thing for another. In the context of carbon trading, it is the ability to exchange carbon permits and carbon credits from different schemes. Proponents of linking carbon markets suggest that greater fungibility would mean greater liquidity, making the scheme more efficient. Critics suggest that linking different schemes would undermine regulations (such as EU limits on credits from agriculture or forestry) adopted to enhance environmental integrity, leading to a race to the bottom on standards.

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