The Flourishing Carbon Trading Market
Carbon trading came forth as a regulatory method to check CO2 emissions, and it has increasingly caught the attention of governments and industries across the globe. Carbon trading involves the sale and buying of carbon credits, where each credit allows the emission of one tonne of carbon dioxide and other greenhouse gases to the buyer, and is the key element of the cap-and-trade system implemented in many countries which adhere to the Kyoto Protocol.
Global emission allotments have been restricted by the Kyoto protocol, and the caps are allocated as carbon credits to each operator, who receives a particular amount of these credits that can be used or traded in the market. Operators with greener technology often do not consume all of their credits, and as a result, can sell these to those who predict that they will be going beyond their allotments. As high-emission organizations are made to compensate for their act, they are driven to look for cleaner technologies.
So far carbon trading has been a success, with market reports indicating that several large companies throughout the globe are advocating this emission-lowering system. This is because such inter-company transactions help in their short-term and medium-term planning.
Carbon trading is increasing exponentially every year, as per the figures reported by the World Bank’s Carbon Finance Unit. There was a 41% increase in the market between 2003 and 2004, and a staggering 240% growth between 2004 and 2005. Growth in the London based carbon finance market has also been very remarkable, establishing the fact that carbon trading is turning out to be a successful business strategy for many organizations. Despite being outside the Kyoto Protocol list of nations, several states and industries in the US have approved of the carbon credits scheme and have adopted it in their business. Additionally, the EU, which has its own carbon trading market, has also been very active in this global trading market.
However, some groups of people have expressed reservation about the effectiveness of carbon trading. As one of the goals of carbon trading is to promote the adoption of greener, low-emission technologies, the exponential increase in carbon trading is a reason for worry as it indicates that businesses are choosing to spend more on the purchase of carbon credits instead of investing in more eco-friendly technologies. Therefore some groups are doubtful of the long-term advantages of carbon trading, and some specialists have suggested the imposition of carbon tax to be paid by errant companies as a more appropriate solution to greenhouse gas emissions.
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