The terms carbon trading and carbon credits are often referred in conferences about global warming on a regular basis, but not everyone comprehends what is meant by these words. In the system of carbon trading, regulations are put on greenhouse gas emissions under the Kyoto Protocol, and the pre-decided emission limits are then allocated across countries, which have to control the greenhouse gas emissions from the different industries and commercial units operating within them.
National governments and industries are allotted fixed quantities of carbon credits to regulate their emission levels, and the credits certify the owner to release a limited amount of CO2 and other gases into the air. One carbon credit is equivalent to the emission of one ton of carbon dioxide. This essentially means that high-emission industries can purchase carbon credits from low-emission entities, thereby maintaining the overall global emissions within the prescribed limit.
The major benefit of carbon trading is that it results in a situation where businesses tending to go beyond their emission allowances have to pay a significant sum to do so, as they have to buy carbon credits from the market. However, for every business that is purchasing credits, there will be a firm which is selling these credits. Therefore the balance in world economy is sustained, while entities with low emission records make profits. This makes companies move away from the carbon-intensive approach of manufacturing, and so the emission levels decrease.
A company - big or small- that timely opts for a cleaner and greener approach to doing business is sure to be rewarded as carbon credits are transacted on the open bourses and can be purchased or sold by anyone. This trading strategy makes sure immediate and substantial rewards for companies with a low emission history. Moreover, nation-wise allocation of limits makes national governments more actively encourage local organizations to decrease emissions. This in turn improves the government's image and makes it affirmatively work towards environment conservation, something that is greatly effective in promoting eco-friendly technologies.
Other options like carbon tax are also in place in some countries of the world, which brings to book high emission industries rather than financially incentivising the low emission ones. The efficacy of such systems is still an issue of debate.
Till date no other system has been able to efficiently manage the issue of carbon emissions in a better way than carbon trading. The carbon trading business has witnessed considerable growth in the past few years, and this proves beyond doubt that the system is effective.
National governments and industries are allotted fixed quantities of carbon credits to regulate their emission levels, and the credits certify the owner to release a limited amount of CO2 and other gases into the air. One carbon credit is equivalent to the emission of one ton of carbon dioxide. This essentially means that high-emission industries can purchase carbon credits from low-emission entities, thereby maintaining the overall global emissions within the prescribed limit.
The major benefit of carbon trading is that it results in a situation where businesses tending to go beyond their emission allowances have to pay a significant sum to do so, as they have to buy carbon credits from the market. However, for every business that is purchasing credits, there will be a firm which is selling these credits. Therefore the balance in world economy is sustained, while entities with low emission records make profits. This makes companies move away from the carbon-intensive approach of manufacturing, and so the emission levels decrease.
A company - big or small- that timely opts for a cleaner and greener approach to doing business is sure to be rewarded as carbon credits are transacted on the open bourses and can be purchased or sold by anyone. This trading strategy makes sure immediate and substantial rewards for companies with a low emission history. Moreover, nation-wise allocation of limits makes national governments more actively encourage local organizations to decrease emissions. This in turn improves the government's image and makes it affirmatively work towards environment conservation, something that is greatly effective in promoting eco-friendly technologies.
Other options like carbon tax are also in place in some countries of the world, which brings to book high emission industries rather than financially incentivising the low emission ones. The efficacy of such systems is still an issue of debate.
Till date no other system has been able to efficiently manage the issue of carbon emissions in a better way than carbon trading. The carbon trading business has witnessed considerable growth in the past few years, and this proves beyond doubt that the system is effective.
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