The words carbon credits and carbon trading usually come up in seminars and events on the perils of global warming, but these concepts are still unfamiliar to a lot of people. Carbon trading is a system whereby greenhouse gas emissions are capped under the Kyoto Protocol, and these caps are then allocated throughout the global market in such a way as to promote lower emissions or decrease release of carbon dioxide and other greenhouse gases.
National governments and industrial units are allotted limited quantities of carbon credits to set a cap on their emission levels, and the credits permit the owner to release a limited amount of CO2 and other gases into the air. One carbon credit is equal to one thousand kilos of carbon dioxide emissions. This implies companies and industries can engage in purchasing and selling of carbon credits based on their respective levels of emissions, thereby keeping the whole world's emission rate within prescribed limits.
This system requires that corporations pay a huge sum for greenhouse gas emissions that go beyond tolerable limits, and this penalty on them is implemented by making purchase of carbon credits mandatory for them. However, both entities selling and purchasing the credits can be found in the carbon credits global market. Hence the balance in world economy is maintained, while entities with low emission records make profits. This inspires organizations to adopt greener technologies, and slowly the global level of greenhouse gas emissions comes down.
Free trade of carbon credits on world exchanges allows greener energy and process usage of a company to be incentivised and capitalized, whether the organization is a small one or a large one. Trade in carbon credits gets instant and considerable advantages for companies with low emissions. Moreover, the entire idea has also been expanded to countries, there would always be encouragement to reduce emissions from the national governments to local companies, which is a huge benefit as many governments are usually blamed for lack of initiative on environment.
However, there are some people who support alternative schemes like carbon tax, which rather than incentivising the greener organizations, will penalize those who have extra emissions. There is much speculation over the efficacy of such systems.
Till now no other scheme has been able to successfully handle the problem of carbon emissions better than carbon trading. The carbon trading market has seen tremendous increase in the past few years, which a lot of people see as evidence that the system works quite well.
National governments and industrial units are allotted limited quantities of carbon credits to set a cap on their emission levels, and the credits permit the owner to release a limited amount of CO2 and other gases into the air. One carbon credit is equal to one thousand kilos of carbon dioxide emissions. This implies companies and industries can engage in purchasing and selling of carbon credits based on their respective levels of emissions, thereby keeping the whole world's emission rate within prescribed limits.
This system requires that corporations pay a huge sum for greenhouse gas emissions that go beyond tolerable limits, and this penalty on them is implemented by making purchase of carbon credits mandatory for them. However, both entities selling and purchasing the credits can be found in the carbon credits global market. Hence the balance in world economy is maintained, while entities with low emission records make profits. This inspires organizations to adopt greener technologies, and slowly the global level of greenhouse gas emissions comes down.
Free trade of carbon credits on world exchanges allows greener energy and process usage of a company to be incentivised and capitalized, whether the organization is a small one or a large one. Trade in carbon credits gets instant and considerable advantages for companies with low emissions. Moreover, the entire idea has also been expanded to countries, there would always be encouragement to reduce emissions from the national governments to local companies, which is a huge benefit as many governments are usually blamed for lack of initiative on environment.
However, there are some people who support alternative schemes like carbon tax, which rather than incentivising the greener organizations, will penalize those who have extra emissions. There is much speculation over the efficacy of such systems.
Till now no other scheme has been able to successfully handle the problem of carbon emissions better than carbon trading. The carbon trading market has seen tremendous increase in the past few years, which a lot of people see as evidence that the system works quite well.
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