The words carbon credits and carbon trading usually come up in conferences and meets on the dangers of global warming, but these concepts are still alien to a lot of people. In the carbon trading system, industries have to adhere to the emission caps of greenhouse gases as set by the Kyoto Protocol that decides and allots these limits across nations to encourage controlled emissions or discourage carbon-intensive methods of operating industries.
National governments and industries are assigned limited number of carbon credits to set a cap on their emission levels, and the credits permit the owner to release a restricted amount of CO2 and other gases into the air. One carbon credit means one ton of carbon dioxide emitted in the environment. This implies companies and industries can engage in buying and selling of carbon credits depending upon their respective levels of emissions, thereby maintaining the whole world's emission level within safe limits.
The key advantage of carbon trading is that it results in a scenario where organizations tending to exceed their emission allowances have to make payment of a substantial sum to do so, as they have to buy carbon credits from the world market. However, this is a reciprocal trade where selling and buying of carbon credits are done simultaneously by low and high emission companies. Hence the balance in world economy is sustained, while entities with low emission records earn profits. This motivates organizations to adopt greener technologies, and gradually the global level of greenhouse gas emissions declines.
A company - large or small- that timely adopts a more eco-friendly and greener approach to operating business is certain to be rewarded as carbon credits are traded on the open bourses and can be bought or sold by anyone. This trading strategy makes sure immediate and substantial rewards for companies with a low emission record. Moreover, with countries and their administration engaged with the concept, national governments on their part would have to ask local companies to decrease emissions, and hence these governments would be pulled out of their traditional stance of indifference towards environmental issues.
Other choices like carbon tax are also implemented in some countries of the world, which brings to book high emission entities rather than financially rewarding the low emission ones. The effectiveness of such schemes is still a matter of debate.
In a short period since its inception, carbon trading has proven to be the most appropriate means to tackle the problem of carbon emissions. The carbon trading market has seen huge increase in the last few years, which a lot of people see as proof that the system works effectively.
National governments and industries are assigned limited number of carbon credits to set a cap on their emission levels, and the credits permit the owner to release a restricted amount of CO2 and other gases into the air. One carbon credit means one ton of carbon dioxide emitted in the environment. This implies companies and industries can engage in buying and selling of carbon credits depending upon their respective levels of emissions, thereby maintaining the whole world's emission level within safe limits.
The key advantage of carbon trading is that it results in a scenario where organizations tending to exceed their emission allowances have to make payment of a substantial sum to do so, as they have to buy carbon credits from the world market. However, this is a reciprocal trade where selling and buying of carbon credits are done simultaneously by low and high emission companies. Hence the balance in world economy is sustained, while entities with low emission records earn profits. This motivates organizations to adopt greener technologies, and gradually the global level of greenhouse gas emissions declines.
A company - large or small- that timely adopts a more eco-friendly and greener approach to operating business is certain to be rewarded as carbon credits are traded on the open bourses and can be bought or sold by anyone. This trading strategy makes sure immediate and substantial rewards for companies with a low emission record. Moreover, with countries and their administration engaged with the concept, national governments on their part would have to ask local companies to decrease emissions, and hence these governments would be pulled out of their traditional stance of indifference towards environmental issues.
Other choices like carbon tax are also implemented in some countries of the world, which brings to book high emission entities rather than financially rewarding the low emission ones. The effectiveness of such schemes is still a matter of debate.
In a short period since its inception, carbon trading has proven to be the most appropriate means to tackle the problem of carbon emissions. The carbon trading market has seen huge increase in the last few years, which a lot of people see as proof that the system works effectively.
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