Carbon trading is a method adopted to reduce the carbon footprints of industrialized countries, and the method has received wide acceptance throughout the world in recent times. In carbon trading, carbon credits are bought and sold by companies and organizations across the globe under the innovative cap-and-trade system, where each credit permits the emission of an equivalent of one thousand kilos of carbon dioxide and other greenhouse gases to the environment.
As per the Kyoto protocol, a limit has been fixed on global emission allowances, which are then apportioned into carbon credits, a particular number of which are allotted to each member. Organizations that think they may go beyond the emission limits can buy these credits from low-emission companies that have credits left with them because of adopting eco-friendly methods of doing business. By having to pay an extra sum to be permitted to make those discharges, a de-motivating factor is created for high-emission operators.
So far market responses on carbon trading have been positive, with most large industries across the world opting for this emission-lowering mechanism. This is because such reciprocal trade makes their short-term and medium-term planning more flexible.
Carbon trading is rising exponentially every year, according to the figures reported by the World Bank’s Carbon Finance Unit. There was a 41% rise in the market between 2003 and 2004, and a huge 240% rise between 2004 and 2005. Growth in the London based carbon finance market has also been very impressive, proving the fact that carbon trading is clearly a profitable business strategy for many organizations. Despite being out of the Kyoto Protocol list of countries, several states and industries in the US have welcomed the carbon credits scheme and have adopted it in their business. Further, the EU, which has its own carbon trading market, has also been very active in this global trading market.
However, some sections of people have expressed reservation about the effectiveness of carbon trading. As one of the goals of carbon trading is to encourage the adoption of more eco-friendly, low-emission technologies, the exponential increase in carbon trading is a cause of concern as it points out that companies are opting to spend more on the buying of carbon credits rather than investing in more eco-friendly technologies. Therefore the effectiveness of carbon trading has remained open to speculation, with some environment specialists suggesting imposition of carbon tax to be a better substitute for attaining a clean environment.
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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