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The words carbon credits and carbon trading usually come up in seminars and meets on the dangers of global warming, but these concepts are still unfamiliar to most people. Carbon trading is a system whereby greenhouse gas emissions are limited under the Kyoto Protocol, and these caps are then allocated across the world market in such a way as to promote lower emissions or decrease release of carbon dioxide and other greenhouse gases.
Governments and industries in many countries are permitted a particular number of carbon credits, giving them the right to emit a limited amount of carbon dioxide and other greenhouse gases into the atmosphere. One carbon credit amounts to the release of one ton of carbon dioxide. This means that low-emission industries can sell carbon credits to high-emission industrial units, thereby ensuring a cap on the greenhouse gas emissions in the world.
This system makes corporations pay a penalty for greenhouse gas emissions that go beyond reasonable limits, and this penalty on them is executed by making purchase of carbon credits mandatory for them. However, for every business that is buying credits, there will be a firm which is selling these credits. Hence the economy as a whole does not get affected at all, while organizations with eco- friendly mechanisms make higher profits. This makes companies move away from the carbon-intensive approach of manufacturing, and so the emission levels fall.
Open trade of carbon credits on world exchanges allows greener energy and process choices of an organization to be incentivised and capitalized, whether the organization is a small one or a big one. Trade in carbon credits gets instant and considerable benefits for organizations with low emissions. Moreover, with countries and their administration engaged with the concept, national governments on their part would have to ask local industries to decrease emissions, and therefore these governments would be taken away from their traditional stance of indifference towards environmental matters.
Carbon tax is another option that may be implemented, in which organizations causing pollution are punished but environment friendly industries are not rewarded for low emissions. The efficacy of such schemes is still an issue of debate.
Till date no other system has been able to efficiently manage the problem of carbon emissions better than carbon trading. The carbon trading business has seen remarkable growth in the last few years, and this proves beyond doubt that the system is impactful.
Governments and industries in many countries are permitted a particular number of carbon credits, giving them the right to emit a limited amount of carbon dioxide and other greenhouse gases into the atmosphere. One carbon credit amounts to the release of one ton of carbon dioxide. This means that low-emission industries can sell carbon credits to high-emission industrial units, thereby ensuring a cap on the greenhouse gas emissions in the world.
This system makes corporations pay a penalty for greenhouse gas emissions that go beyond reasonable limits, and this penalty on them is executed by making purchase of carbon credits mandatory for them. However, for every business that is buying credits, there will be a firm which is selling these credits. Hence the economy as a whole does not get affected at all, while organizations with eco- friendly mechanisms make higher profits. This makes companies move away from the carbon-intensive approach of manufacturing, and so the emission levels fall.
Open trade of carbon credits on world exchanges allows greener energy and process choices of an organization to be incentivised and capitalized, whether the organization is a small one or a big one. Trade in carbon credits gets instant and considerable benefits for organizations with low emissions. Moreover, with countries and their administration engaged with the concept, national governments on their part would have to ask local industries to decrease emissions, and therefore these governments would be taken away from their traditional stance of indifference towards environmental matters.
Carbon tax is another option that may be implemented, in which organizations causing pollution are punished but environment friendly industries are not rewarded for low emissions. The efficacy of such schemes is still an issue of debate.
Till date no other system has been able to efficiently manage the problem of carbon emissions better than carbon trading. The carbon trading business has seen remarkable growth in the last few years, and this proves beyond doubt that the system is impactful.
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