Given the increasing concern about global warming and greater carbon emissions into the atmosphere, national administrations and other organizations are trying to find viable alternatives to reduce pollution. Carbon offset and carbon trading are among the most effective techniques being practiced for achieving this.
Companies buy carbon credits that are available in the market in the carbon trading model. The credits allow companies to go above their prescribed limit of greenhouse gas emissions and not face the burden of a heavy fine for doing so.
Carbon trading motivates organizations to control their emission levels by giving economic incentives for doing so. The purpose is to make companies realize that the price of carbon credits is much more than the cost of opting for eco-friendly ways of doing business. If the firm is made to bear the costs of harm to the environment then it will use techniques that are environment friendly to score over its rivals. As more and more companies adopt this approach, the overall emission levels around the globe will decrease gradually, thus protecting the environment.
Another significant advantage of carbon trading is that it works on an open market system where any company can purchase or sell carbon credits. As it does not involve any direct state interference to impose penalties or to create local rules, this method is highly successful.
The biggest disadvantage of carbon trading is absence of a comprehensive and structured international system for its trade. As the transactions are conducted on an international level largely, it becomes tough for a small company to engage in the system on a continuous basis.
A few companies are disinclined to adopt this system, as they do not want to incur costs that cannot be passed on to their products' end buyers. Further, several small enterprises are not able to bear the costs of buying the technology or implementing state-of-the-art techniques that would reduce their emissions. As a result, the smaller companies are forced to continuously purchase carbon credits in this system which leads to decreasing of their capability to compete with larger corporations.
Companies buy carbon credits that are available in the market in the carbon trading model. The credits allow companies to go above their prescribed limit of greenhouse gas emissions and not face the burden of a heavy fine for doing so.
Carbon trading motivates organizations to control their emission levels by giving economic incentives for doing so. The purpose is to make companies realize that the price of carbon credits is much more than the cost of opting for eco-friendly ways of doing business. If the firm is made to bear the costs of harm to the environment then it will use techniques that are environment friendly to score over its rivals. As more and more companies adopt this approach, the overall emission levels around the globe will decrease gradually, thus protecting the environment.
Another significant advantage of carbon trading is that it works on an open market system where any company can purchase or sell carbon credits. As it does not involve any direct state interference to impose penalties or to create local rules, this method is highly successful.
The biggest disadvantage of carbon trading is absence of a comprehensive and structured international system for its trade. As the transactions are conducted on an international level largely, it becomes tough for a small company to engage in the system on a continuous basis.
A few companies are disinclined to adopt this system, as they do not want to incur costs that cannot be passed on to their products' end buyers. Further, several small enterprises are not able to bear the costs of buying the technology or implementing state-of-the-art techniques that would reduce their emissions. As a result, the smaller companies are forced to continuously purchase carbon credits in this system which leads to decreasing of their capability to compete with larger corporations.
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