The carbon trading concept came out of the necessity to decrease greenhouse gas emissions, and has become increasingly popular throughout the world in recent years. In carbon trading, carbon credits are purchased and sold by industries and organizations throughout the world under the innovative cap-and-trade system, where one credit permits the release of an equivalent of one tonne 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 transacted in the market. Operators with greener technology often do not consume all of their credits, and as a result, can sell these to those who predict that they will be going beyond their allowances. By having to make payment of an additional sum to be allowed to make those emissions, a disincentive is made for high-emission operators.
So far carbon trading has been an effective system, with market responses suggesting that most large companies across the world are supporting this emission-lowering system. This is because carbon trading gives them flexibility in their short-term and medium-term planning.
Carbon trading is increasing exponentially every year, according to the statistics reported by the World Bank's Carbon Finance Unit. The years 2003 and 2004 saw a trading growth of 41% in the market, while the increase in the following cycle has been an incredible 240%. Growth in the London based carbon finance market has also been very remarkable, establishing the fact that carbon trading is turning out to be a successful business strategy for many organizations. Several states and industries in the US have also opted for carbon trading practices, even though the country is not a signatory to the Kyoto Protocol. The EU too, with its own carbon trading system, has been actively engaged in carbon trading for some years now.
However, some sections of people have expressed reservation about the effectiveness of carbon trading. The immense increase in the carbon trading business suggests that companies across the world are actually more eager to purchase carbon credits instead of investing in low emission energy alternatives which has always been one of the objectives of carbon trading. Therefore certain groups are apprehensive of the long-term advantages of carbon trading, and some experts ave suggested the imposition of carbon tax to be paid by errant companies as a better solution to greenhouse gas emissions.
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 transacted in the market. Operators with greener technology often do not consume all of their credits, and as a result, can sell these to those who predict that they will be going beyond their allowances. By having to make payment of an additional sum to be allowed to make those emissions, a disincentive is made for high-emission operators.
So far carbon trading has been an effective system, with market responses suggesting that most large companies across the world are supporting this emission-lowering system. This is because carbon trading gives them flexibility in their short-term and medium-term planning.
Carbon trading is increasing exponentially every year, according to the statistics reported by the World Bank's Carbon Finance Unit. The years 2003 and 2004 saw a trading growth of 41% in the market, while the increase in the following cycle has been an incredible 240%. Growth in the London based carbon finance market has also been very remarkable, establishing the fact that carbon trading is turning out to be a successful business strategy for many organizations. Several states and industries in the US have also opted for carbon trading practices, even though the country is not a signatory to the Kyoto Protocol. The EU too, with its own carbon trading system, has been actively engaged in carbon trading for some years now.
However, some sections of people have expressed reservation about the effectiveness of carbon trading. The immense increase in the carbon trading business suggests that companies across the world are actually more eager to purchase carbon credits instead of investing in low emission energy alternatives which has always been one of the objectives of carbon trading. Therefore certain groups are apprehensive of the long-term advantages of carbon trading, and some experts ave suggested the imposition of carbon tax to be paid by errant companies as a better solution to greenhouse gas emissions.
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