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Carbon trading is a method adopted to decrease the carbon emissions by industrialized nations, and the method has gained wide acceptance across the world in recent years. In carbon trading, carbon credits are purchased and sold by companies and other entities throughout the world under the innovative cap-and-trade system, where one credit allows the emission of an equivalent of one tonne of carbon dioxide and other greenhouse gases to the atmosphere.
Global emission allowances have been restricted by the Kyoto protocol, and the caps are allocated as carbon credits to each operator, who gets a certain amount of these credits that can be used or transacted in the market. Operators with more eco-friendly technology generally do not consume all of their credits, and as a result, can sell these to those who foresee that they will be going beyond their allotments. By having to pay an extra sum to be permitted to make those emissions, a de-motivating factor is created for high-emission operators.
So far carbon trading has been a success, with market reports indicating that most large industries across the globe are supporting this emission-lowering system. This is because such reciprocal trade makes their near future and medium-term planning more flexible.
Statistics furnished by the World Bank's Carbon Finance Unit confirm that the carbon trading business is growing at a very rapid rate every year. There was a 41% growth in the market between 2003 and 2004, and a huge 240% rise between 2004 and 2005. The carbon finance market, centred in London, has also seen stupendous growth, which clearly suggests that the trade of carbon credits is proving to be a profitable business for many companies. Even though the US did not participate in the Kyoto Protocol, many of its states and industries have embraced the carbon trading practice. Further, the EU, which has its own carbon trading system, has also been very participative in this global trading market.
However, some groups of people have expressed reservation about the effectiveness of carbon trading. The stupendous growth in the carbon trading business indicates that companies across the world are in fact more willing to purchase carbon credits instead of utilizing low emission energy alternatives which has always been one of the objectives of carbon trading. Hence certain groups are apprehensive of the long-term benefits of carbon trading, and some specialists have opined the levying of carbon tax to be paid by errant companies as a more appropriate solution to greenhouse gas emissions.
Global emission allowances have been restricted by the Kyoto protocol, and the caps are allocated as carbon credits to each operator, who gets a certain amount of these credits that can be used or transacted in the market. Operators with more eco-friendly technology generally do not consume all of their credits, and as a result, can sell these to those who foresee that they will be going beyond their allotments. By having to pay an extra sum to be permitted to make those emissions, a de-motivating factor is created for high-emission operators.
So far carbon trading has been a success, with market reports indicating that most large industries across the globe are supporting this emission-lowering system. This is because such reciprocal trade makes their near future and medium-term planning more flexible.
Statistics furnished by the World Bank's Carbon Finance Unit confirm that the carbon trading business is growing at a very rapid rate every year. There was a 41% growth in the market between 2003 and 2004, and a huge 240% rise between 2004 and 2005. The carbon finance market, centred in London, has also seen stupendous growth, which clearly suggests that the trade of carbon credits is proving to be a profitable business for many companies. Even though the US did not participate in the Kyoto Protocol, many of its states and industries have embraced the carbon trading practice. Further, the EU, which has its own carbon trading system, has also been very participative in this global trading market.
However, some groups of people have expressed reservation about the effectiveness of carbon trading. The stupendous growth in the carbon trading business indicates that companies across the world are in fact more willing to purchase carbon credits instead of utilizing low emission energy alternatives which has always been one of the objectives of carbon trading. Hence certain groups are apprehensive of the long-term benefits of carbon trading, and some specialists have opined the levying of carbon tax to be paid by errant companies as a more appropriate solution to greenhouse gas emissions.
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