Carbon trading emerged as a regulatory method to control CO2 emissions, and it has increasingly caught the fancy of governments and industries across the globe. In carbon trading, carbon credits are purchased and sold by industries and other entities across the globe under the innovative cap-and-trade system, where each credit allows the emission of an equivalent of one thousand kilos of carbon dioxide and other greenhouse gases to the atmosphere.
As per the Kyoto protocol, a cap has been fixed on global emission allowances, which are then distributed into carbon credits, a particular number of which are granted to each member. Companies that think they may cross the emission limits can buy these credits from low-emission industries that have credits left with them because of adopting cleaner methods of doing business. As high-emission organizations are forced to pay for their act, they are driven to opt for cleaner technologies.
So far market responses on carbon trading have been positive, with most big industries across the globe embracing this emission-lowering mechanism. This is because such quid pro quo trade makes their near future and medium-term planning more flexible.
If the figures of the World Bank's Carbon Finance Unit are to be considered, then carbon trading is growing very rapidly with each passing year. There was a 41% increase in the market between 2003 and 2004, and a staggering 240% rise between 2004 and 2005. The London based carbon finance market has also grown at an amazing rate, which makes it evident that the business of carbon trading is fetching good profits for many industries in the world. Many states and industries in the US have also opted for carbon trading practices, even though the country is not a signatory to the Kyoto Protocol. Besides, the EU with its own carbon trading system has also been playing a major role in the carbon trading market.
However, some sections of people are not convinced about the effectiveness of carbon trading. Carbon trading is in fact aimed at causing high-emission organizations invest in greener technologies and thereby encouraging development of low emission energy alternatives, which is not materializing because defaulting companies seem to be keener on buying carbon credits rather than choosing eco-friendly technologies. Hence, carbon trading has been a topic of discussion in many parts of the world, and some specialists are of the opinion that alternatives like taxation on extra carbon emissions is the more suited way to regulate the greenhouse gas emissions.
As per the Kyoto protocol, a cap has been fixed on global emission allowances, which are then distributed into carbon credits, a particular number of which are granted to each member. Companies that think they may cross the emission limits can buy these credits from low-emission industries that have credits left with them because of adopting cleaner methods of doing business. As high-emission organizations are forced to pay for their act, they are driven to opt for cleaner technologies.
So far market responses on carbon trading have been positive, with most big industries across the globe embracing this emission-lowering mechanism. This is because such quid pro quo trade makes their near future and medium-term planning more flexible.
If the figures of the World Bank's Carbon Finance Unit are to be considered, then carbon trading is growing very rapidly with each passing year. There was a 41% increase in the market between 2003 and 2004, and a staggering 240% rise between 2004 and 2005. The London based carbon finance market has also grown at an amazing rate, which makes it evident that the business of carbon trading is fetching good profits for many industries in the world. Many states and industries in the US have also opted for carbon trading practices, even though the country is not a signatory to the Kyoto Protocol. Besides, the EU with its own carbon trading system has also been playing a major role in the carbon trading market.
However, some sections of people are not convinced about the effectiveness of carbon trading. Carbon trading is in fact aimed at causing high-emission organizations invest in greener technologies and thereby encouraging development of low emission energy alternatives, which is not materializing because defaulting companies seem to be keener on buying carbon credits rather than choosing eco-friendly technologies. Hence, carbon trading has been a topic of discussion in many parts of the world, and some specialists are of the opinion that alternatives like taxation on extra carbon emissions is the more suited way to regulate the greenhouse gas emissions.
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