Carbon credits and carbon trading are common topics for debates and discussions on environmental matters, but a majority of us are not fully acquainted with these terms. In the system of carbon trading, regulations are imposed on greenhouse gas emissions under the Kyoto Protocol, and the pre-decided emission limits are then distributed across countries, which have to regulate the greenhouse gas emissions from the different industries and commercial units operating within them.
Carbon credits are given to industrial units and governments throughout the world, which allows the owner to discharge a limited amount of CO2 and other greenhouse gases into the air. One carbon credit amounts to the emission of one ton of carbon dioxide. This implies 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.
The key benefit of carbon trading is that it results in a situation where businesses tending to go beyond their emission limits have to make payment of a substantial amount to do so, as they have to purchase carbon credits from the market. However, for every business that is purchasing credits, there will be a firm which is selling these credits. Therefore the balance in global economy is sustained, while entities with low emission records make profits. This encourages companies to fund green processes as well and eventually the overall greenhouse gases emissions start decreasing.
Free trade of carbon credits on world exchanges enables greener energy and process choices of an organization to be incentivised and capitalized, whether the company is a small one or a big one. Trade in carbon credits fetches instant and considerable advantages for companies with low emissions. Moreover, with countries and their administration engaged with the idea, national governments on their part would have to ask local companies to reduce emissions, and thus these governments would be taken away from their traditional stance of indifference towards environmental matters.
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 a lot of doubt over the efficacy of such systems.
In a short span since its adoption, carbon trading has shown to be the most appropriate means to deal with the issue of carbon emissions. The efficacy of the system is evident from the unprecedented growth in the carbon trading market witnessed in the past few years.
Carbon credits are given to industrial units and governments throughout the world, which allows the owner to discharge a limited amount of CO2 and other greenhouse gases into the air. One carbon credit amounts to the emission of one ton of carbon dioxide. This implies 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.
The key benefit of carbon trading is that it results in a situation where businesses tending to go beyond their emission limits have to make payment of a substantial amount to do so, as they have to purchase carbon credits from the market. However, for every business that is purchasing credits, there will be a firm which is selling these credits. Therefore the balance in global economy is sustained, while entities with low emission records make profits. This encourages companies to fund green processes as well and eventually the overall greenhouse gases emissions start decreasing.
Free trade of carbon credits on world exchanges enables greener energy and process choices of an organization to be incentivised and capitalized, whether the company is a small one or a big one. Trade in carbon credits fetches instant and considerable advantages for companies with low emissions. Moreover, with countries and their administration engaged with the idea, national governments on their part would have to ask local companies to reduce emissions, and thus these governments would be taken away from their traditional stance of indifference towards environmental matters.
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 a lot of doubt over the efficacy of such systems.
In a short span since its adoption, carbon trading has shown to be the most appropriate means to deal with the issue of carbon emissions. The efficacy of the system is evident from the unprecedented growth in the carbon trading market witnessed in the past few years.
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