Carbon credits and carbon trading are hot topics for debates and discussions on environmental matters, but most of us are not fully acquainted with these concepts. In the system of carbon trading, controls are put 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 various industries and commercial units operating within them.
Governments and industrial units in many countries are allowed a certain number of carbon credits, giving them the right to release a restricted amount of carbon dioxide and other greenhouse gases into the air. One carbon credit amounts to one ton of carbon dioxide released in the environment. This essentially entails that high-emission corporations can purchase carbon credits from low-emission entities, thereby keeping the net global emissions within the prescribed cap.
This system makes corporations pay a penalty for greenhouse gas emissions that go beyond reasonable limits, and this penalty on them is executed by making purchase of carbon credits compulsory for them. However, this is a reciprocal trade where selling and buying of carbon credits are done simultaneously by low and high emission firms. Therefore the balance in world economy is sustained, while organizations with low emission records earn profits. This inspires organizations to adopt eco-friendly technologies, and slowly the global level of greenhouse gas emissions declines.
Open buying and selling of carbon credits on world exchanges allows greener energy and process choices of a company to be incentivised and capitalized, whether the organization is a small one or a large one. Trade in carbon credits gets instant and considerable benefits for organizations with low emissions. Moreover, with countries and their administration engaged with the idea, national governments on their part would have to ask local industries to reduce emissions, and therefore these governments would be taken away from their traditional stance of indifference towards environmental matters.
Carbon tax is another option that may be advocated, in which organizations causing pollution are penalized but environment friendly organizations are not rewarded for low emissions. There is a lot of speculation over the efficacy of such systems.
Till now no other system has been able to efficiently handle the problem of carbon emissions better than carbon trading. The carbon trading market has seen huge increase in the past few years, which a lot of people see as proof that the system works quite well.
Governments and industrial units in many countries are allowed a certain number of carbon credits, giving them the right to release a restricted amount of carbon dioxide and other greenhouse gases into the air. One carbon credit amounts to one ton of carbon dioxide released in the environment. This essentially entails that high-emission corporations can purchase carbon credits from low-emission entities, thereby keeping the net global emissions within the prescribed cap.
This system makes corporations pay a penalty for greenhouse gas emissions that go beyond reasonable limits, and this penalty on them is executed by making purchase of carbon credits compulsory for them. However, this is a reciprocal trade where selling and buying of carbon credits are done simultaneously by low and high emission firms. Therefore the balance in world economy is sustained, while organizations with low emission records earn profits. This inspires organizations to adopt eco-friendly technologies, and slowly the global level of greenhouse gas emissions declines.
Open buying and selling of carbon credits on world exchanges allows greener energy and process choices of a company to be incentivised and capitalized, whether the organization is a small one or a large one. Trade in carbon credits gets instant and considerable benefits for organizations with low emissions. Moreover, with countries and their administration engaged with the idea, national governments on their part would have to ask local industries to reduce emissions, and therefore these governments would be taken away from their traditional stance of indifference towards environmental matters.
Carbon tax is another option that may be advocated, in which organizations causing pollution are penalized but environment friendly organizations are not rewarded for low emissions. There is a lot of speculation over the efficacy of such systems.
Till now no other system has been able to efficiently handle the problem of carbon emissions better than carbon trading. The carbon trading market has seen huge increase in the past few years, which a lot of people see as proof that the system works quite well.
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