Carbon trading emerged as a regulatory method to control CO2 emissions, and it has increasingly caught the fancy of governments and industries throughout the world. Carbon trading is basically a trade in carbon credits in which each credit allows the purchaser to release one tonne of carbon dioxide and other greenhouse gases into the atmosphere, and it is the basic trading principle governing the cap-and-trade system as devised in the Kyoto Protocol.
As per the Kyoto protocol, a cap has been set on global emission allowances, which are then distributed into carbon credits, a certain number of which are granted to each member. Operators with more eco-friendly technology often do not consume all of their credits, and as a consequence, can sell these to those who foresee that they will be exceeding their allowances. As high-emission organizations are forced to compensate for their act, they are driven to look for greener technologies.
So far carbon trading has been an effective system, with market responses indicating that several large industries throughout the world are advocating this emission-lowering solution. This is because carbon trading allows them flexibility in their short-term and medium-term strategies.
Statistics provided by the World Bank's Carbon Finance Unit confirm that the carbon trading business is increasing at a very fast rate every year. There has been a great increase from 41% to 240% in the carbon trading market between the years 2003 and 2005. The London based carbon finance market has also grown at an amazing rate, which makes it evident that the method of carbon trading is reaping good profits for many industries in the world. Many states and industries in the US have also adopted 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 involved in carbon trading for some years now.
However, there are some groups who have criticised this policy. Carbon trading is in fact targeted at causing high-emission organizations invest in more eco-friendly technologies and thereby encouraging development of low emission energy alternatives, which is not materializing because defaulting organisations seem to be keener on buying carbon credits rather than choosing eco-friendly technologies. Hence some groups are doubtful of the long-term benefits of carbon trading, and some specialists have suggested the levying of carbon tax to be paid by errant organizations as a more appropriate solution to greenhouse gas emissions.
As per the Kyoto protocol, a cap has been set on global emission allowances, which are then distributed into carbon credits, a certain number of which are granted to each member. Operators with more eco-friendly technology often do not consume all of their credits, and as a consequence, can sell these to those who foresee that they will be exceeding their allowances. As high-emission organizations are forced to compensate for their act, they are driven to look for greener technologies.
So far carbon trading has been an effective system, with market responses indicating that several large industries throughout the world are advocating this emission-lowering solution. This is because carbon trading allows them flexibility in their short-term and medium-term strategies.
Statistics provided by the World Bank's Carbon Finance Unit confirm that the carbon trading business is increasing at a very fast rate every year. There has been a great increase from 41% to 240% in the carbon trading market between the years 2003 and 2005. The London based carbon finance market has also grown at an amazing rate, which makes it evident that the method of carbon trading is reaping good profits for many industries in the world. Many states and industries in the US have also adopted 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 involved in carbon trading for some years now.
However, there are some groups who have criticised this policy. Carbon trading is in fact targeted at causing high-emission organizations invest in more eco-friendly technologies and thereby encouraging development of low emission energy alternatives, which is not materializing because defaulting organisations seem to be keener on buying carbon credits rather than choosing eco-friendly technologies. Hence some groups are doubtful of the long-term benefits of carbon trading, and some specialists have suggested the levying of carbon tax to be paid by errant organizations as a more appropriate solution to greenhouse gas emissions.
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