Carbon trading is a method adopted to decrease the carbon footprints of industrialized countries, and the method has gained wide acceptance across the world in recent times. In carbon trading, carbon credits are purchased and sold by companies and organizations throughout the world under the innovative cap-and-trade system, where each credit permits the release of an equivalent of one thousand kilos of carbon dioxide and other greenhouse gases to the environment.
Global emission allotments have been capped by the Kyoto protocol, and the caps are allocated as carbon credits to every operator, who receives a certain amount of these credits that can be used or traded in the market. Companies that think they may go beyond the emission limits can purchase these credits from low-emission industries that have extra credits with them because of opting for cleaner methods of doing business. High-emission operators are discouraged for their excessive emissions by this monetary compensation for polluting the atmosphere.
Market trends in carbon trading suggest that it has turned into the greenhouse gases emission-lowering method of choice for most big corporations across the world. This is because such quid pro quo trade makes their near future and medium-term planning more flexible.
Figures provided by the World Bank’s Carbon Finance Unit confirm that the carbon trading business is growing at a very fast rate every year. There was a 41% growth in the market between 2003 and 2004, and a huge 240% rise between 2004 and 2005. The carbon finance market, centred in London, has also seen immense growth, which clearly suggests that the exchange of carbon credits has turned out to be a profitable business for many companies. Even though the US did not participate in the Kyoto Protocol, many of its states and organizations have embraced the carbon trading practice. Besides, the EU with its own carbon trading system has also been performing a key role in the carbon trading market.
However, some sections of people have expressed reservation about the effectiveness of carbon trading. The immense increase in the carbon trading business indicates that companies throughout the globe are actually more eager to purchase carbon credits rather than utilizing low emission energy options which has always been one of the goals of carbon trading. Therefore certain groups are apprehensive of the long-term advantages of carbon trading, and some experts ave opined the levying of carbon tax to be paid by negligent organizations as a better solution to greenhouse gas emissions.
Discover more about carbon credits and carbon trading and get a deeper understanding on how you can help in saving the environment.
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