Carbon Trading Market - Basics And Trends
Carbon trading is a method adopted to decrease the carbon footprints of industrialized nations, and the method has received wide approval throughout the world in recent times. Carbon trading involves the selling and buying of carbon credits, where every single credit allows the emission of one tonne of carbon dioxide and other greenhouse gases to the buyer, and is the primary component of the cap-and-trade system in use in several countries which adhere to the Kyoto Protocol.
Global emission allotments have been capped by the Kyoto protocol, and the caps are allocated as carbon credits to every operator, who receives a certain amount of these credits that can be used or transacted in the market. Organizations that think they may cross the emission limits can buy these credits from low-emission industries that have extra credits with them because of adopting cleaner methods of doing business. By having to pay an extra sum to be allowed to make those emissions, a de-motivating factor is made for high-emission operators.
So far market responses on carbon trading have been encouraging, with most big industries throughout the world embracing this emission-lowering mechanism. This is because such reciprocal trade makes their near future and medium-term planning more flexible.
Carbon trading is increasing exponentially each year, as per the figures reported by the World Bank's Carbon Finance Unit. 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 carbon finance market, centred in London, has also seen stupendous growth, which clearly suggests that the exchange of carbon credits has turned out to be a profitable business for many organizations. Despite being out of the Kyoto Protocol list of countries, many states and industries in the US have approved of the carbon credits scheme and have incorporated it in their business. Additionally, the EU, which has its own carbon trading market, has also been very participative in this global trading market.
However, there are certain groups who have criticised this policy. Carbon trading is actually targeted at making high-emission organizations invest in more eco-friendly technologies and thereby promoting development of low emission energy substitutes, which is not happening because errant companies seem to be keener on buying carbon credits instead of choosing eco-friendly technologies. Thus, carbon trading has been a topic of debate in many parts of the world, and some experts are of the opinion that options like taxation on excessive carbon emissions is the better way to control the greenhouse gas emissions. - 21393
Global emission allotments have been capped by the Kyoto protocol, and the caps are allocated as carbon credits to every operator, who receives a certain amount of these credits that can be used or transacted in the market. Organizations that think they may cross the emission limits can buy these credits from low-emission industries that have extra credits with them because of adopting cleaner methods of doing business. By having to pay an extra sum to be allowed to make those emissions, a de-motivating factor is made for high-emission operators.
So far market responses on carbon trading have been encouraging, with most big industries throughout the world embracing this emission-lowering mechanism. This is because such reciprocal trade makes their near future and medium-term planning more flexible.
Carbon trading is increasing exponentially each year, as per the figures reported by the World Bank's Carbon Finance Unit. 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 carbon finance market, centred in London, has also seen stupendous growth, which clearly suggests that the exchange of carbon credits has turned out to be a profitable business for many organizations. Despite being out of the Kyoto Protocol list of countries, many states and industries in the US have approved of the carbon credits scheme and have incorporated it in their business. Additionally, the EU, which has its own carbon trading market, has also been very participative in this global trading market.
However, there are certain groups who have criticised this policy. Carbon trading is actually targeted at making high-emission organizations invest in more eco-friendly technologies and thereby promoting development of low emission energy substitutes, which is not happening because errant companies seem to be keener on buying carbon credits instead of choosing eco-friendly technologies. Thus, carbon trading has been a topic of debate in many parts of the world, and some experts are of the opinion that options like taxation on excessive carbon emissions is the better way to control the greenhouse gas emissions. - 21393
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