Carbon Emissions Trading Market Trends
The carbon trading concept came out of the necessity to decrease greenhouse gas emissions, and has become increasingly popular throughout the world in recent years. Carbon trading involves the selling and buying of carbon credits, where each credit permits the emission of one tonne of carbon dioxide and other greenhouse gases to the purchaser, and is the primary element of the cap-and-trade system implemented in many countries which are bound by the Kyoto Protocol.
As per the Kyoto protocol, a cap has been fixed on global emission levels, which are then apportioned into carbon credits, a certain number of which are allotted to each member. Operators with more eco-friendly technology generally do not use up all of their credits, and as a result, can sell these to those who predict that they will be exceeding their allowances. High-emission operators are penalized for their high emissions by this penalty for polluting the atmosphere.
So far market responses on carbon trading have been positive, with most big industries throughout the globe embracing this emission-lowering method. This is because carbon trading allows them flexibility in their short-term and medium-term planning.
If the figures of the World Bank’s Carbon Finance Unit are to be considered, then carbon trading is growing very rapidly with each passing year. There has been an amazing growth from 41% to 240% in the carbon trading market between the years 2003 and 2005. The carbon finance market, based in London, has also seen immense growth, which clearly indicates that the exchange of carbon credits is proving to be a profitable business for many companies. Even though the US did not sign 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 sections of people have expressed reservation about the effectiveness of carbon trading. Carbon trading is actually targeted at making high-emission companies invest in greener technologies and thereby encouraging development of low emission energy alternatives, which is not happening because errant organisations seem to be keener on buying carbon credits instead of opting for eco-friendly technologies. Hence certain groups are apprehensive of the long-term advantages of carbon trading, and some specialists have opined the imposition of carbon tax to be paid by errant companies as a more appropriate solution to greenhouse gas emissions.
Discover more about carbon credits and carbon offset and get a deeper understanding on how you can help in saving the environment.
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