Carbon trading came forth as a regulatory method to check CO2 emissions, and it has increasingly caught the attention of governments and industries throughout the globe. In carbon trading, carbon credits are bought and sold by industries and organizations throughout the globe under the innovative cap-and-trade system, where one credit allows the emission of an equivalent of one tonne of carbon dioxide and other greenhouse gases to the atmosphere.
Global emission allowances have been capped by the Kyoto protocol, and the caps are allocated as carbon credits to each operator, who gets a certain amount of these credits that can be consumed or traded in the market. Organizations that are left with a stock of credits due to their adoption of greener alternatives can sell credits to companies that will fall into the high-emission category for exceeding their authorized limits. As high-emission companies are forced to compensate for their act, they are driven to opt for cleaner technologies.
So far market reports on carbon trading have been positive, with most large organizations throughout the world opting for this emission-lowering method. This is because such quid pro quo trade makes their near future and medium-term planning more flexible.
If the statistics of the World Bank's Carbon Finance Unit are to be believed, then carbon trading is growing at a great rate with each passing year. There was a 41% increase in the market between 2003 and 2004, and a staggering 240% growth between 2004 and 2005. Growth in the London centred carbon finance market has also been very remarkable, proving the fact that carbon trading is clearly a successful business strategy for many companies. Despite being out of the Kyoto Protocol list of nations, several states and industries in the US have approved of the carbon credits scheme and have incorporated it in their business. In addition, the EU with its own carbon trading system has also been performing a key role in the carbon trading market.
However, some groups of people have expressed reservation about the effectiveness of carbon trading. Carbon trading is actually targeted at making high-emission organizations invest in more eco-friendly technologies and thereby encouraging development of low emission energy substitutes, which is not materializing because errant organisations seem to be more interested in buying carbon credits instead of choosing eco-friendly technologies. Hence the effectiveness of carbon trading has remained open to debate, with some environment specialists proposing imposition of carbon tax to be a better alternative for achieving an emission-free environment. - 29952
Global emission allowances have been capped by the Kyoto protocol, and the caps are allocated as carbon credits to each operator, who gets a certain amount of these credits that can be consumed or traded in the market. Organizations that are left with a stock of credits due to their adoption of greener alternatives can sell credits to companies that will fall into the high-emission category for exceeding their authorized limits. As high-emission companies are forced to compensate for their act, they are driven to opt for cleaner technologies.
So far market reports on carbon trading have been positive, with most large organizations throughout the world opting for this emission-lowering method. This is because such quid pro quo trade makes their near future and medium-term planning more flexible.
If the statistics of the World Bank's Carbon Finance Unit are to be believed, then carbon trading is growing at a great rate with each passing year. There was a 41% increase in the market between 2003 and 2004, and a staggering 240% growth between 2004 and 2005. Growth in the London centred carbon finance market has also been very remarkable, proving the fact that carbon trading is clearly a successful business strategy for many companies. Despite being out of the Kyoto Protocol list of nations, several states and industries in the US have approved of the carbon credits scheme and have incorporated it in their business. In addition, the EU with its own carbon trading system has also been performing a key role in the carbon trading market.
However, some groups of people have expressed reservation about the effectiveness of carbon trading. Carbon trading is actually targeted at making high-emission organizations invest in more eco-friendly technologies and thereby encouraging development of low emission energy substitutes, which is not materializing because errant organisations seem to be more interested in buying carbon credits instead of choosing eco-friendly technologies. Hence the effectiveness of carbon trading has remained open to debate, with some environment specialists proposing imposition of carbon tax to be a better alternative for achieving an emission-free environment. - 29952
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