The carbon trading concept came out of the need to decrease greenhouse gas emissions, and has become more and more popular across the globe in the last few years. Carbon trading is basically a trade in carbon credits in which each credit allows the buyer to discharge one tonne of carbon dioxide and other greenhouse gases into the air, and it is the basic trading principle governing the cap-and-trade system as devised in the Kyoto Protocol.
As per the Kyoto protocol, a limit has been set on global emission levels, which are then apportioned into carbon credits, a certain number of which are allotted to each operator. Operators with greener technology generally do not consume all of their credits, and as a consequence, can sell these to those who predict that they will be going beyond their allowances. High-emission operators are discouraged for their excessive emissions by this penalty for pollution of the atmosphere.
Market trends in carbon trading suggest that it has become the greenhouse gases emission-lowering mechanism of choice for a lot of big industries across the world. This is because carbon trading gives them flexibility in their short-term and medium-term strategies.
If the statistics of the World Bank's Carbon Finance Unit are to be believed, then carbon trading is increasing very rapidly with each passing year. The years 2003 and 2004 saw a trading increase of 41% in the market, while the growth in the following cycle has been an incredible 240%. The London based carbon finance market has also grown at an amazing rate, which clearly shows that the method of carbon trading is fetching good profits for many organizations in the world. Even though the US did not participate in the Kyoto Protocol, many of its states and industries have taken to the carbon trading practice. The EU too, with its own carbon trading system, has been actively engaged in carbon trading for a few years now.
However, this trend has not received a favourable reaction from a few parties. Carbon trading is in fact targeted at causing high-emission organizations invest in more eco-friendly technologies and thereby promoting development of low emission energy alternatives, which is not happening because errant companies seem to be keener on buying carbon credits rather than choosing eco-friendly technologies. Hence the effectiveness of carbon trading has remained open to debate, with some environment experts proposing imposition of carbon tax to be a more suited alternative for achieving an emission-free environment.
As per the Kyoto protocol, a limit has been set on global emission levels, which are then apportioned into carbon credits, a certain number of which are allotted to each operator. Operators with greener technology generally do not consume all of their credits, and as a consequence, can sell these to those who predict that they will be going beyond their allowances. High-emission operators are discouraged for their excessive emissions by this penalty for pollution of the atmosphere.
Market trends in carbon trading suggest that it has become the greenhouse gases emission-lowering mechanism of choice for a lot of big industries across the world. This is because carbon trading gives them flexibility in their short-term and medium-term strategies.
If the statistics of the World Bank's Carbon Finance Unit are to be believed, then carbon trading is increasing very rapidly with each passing year. The years 2003 and 2004 saw a trading increase of 41% in the market, while the growth in the following cycle has been an incredible 240%. The London based carbon finance market has also grown at an amazing rate, which clearly shows that the method of carbon trading is fetching good profits for many organizations in the world. Even though the US did not participate in the Kyoto Protocol, many of its states and industries have taken to the carbon trading practice. The EU too, with its own carbon trading system, has been actively engaged in carbon trading for a few years now.
However, this trend has not received a favourable reaction from a few parties. Carbon trading is in fact targeted at causing high-emission organizations invest in more eco-friendly technologies and thereby promoting development of low emission energy alternatives, which is not happening because errant companies seem to be keener on buying carbon credits rather than choosing eco-friendly technologies. Hence the effectiveness of carbon trading has remained open to debate, with some environment experts proposing imposition of carbon tax to be a more suited alternative for achieving an emission-free environment.
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