The carbon trading concept came out of the necessity to cut down on greenhouse gas emissions, and has become more and more popular across the globe in the last few years. In carbon trading, carbon credits are purchased and sold by companies and organizations throughout the globe under the innovative cap-and-trade system, where each credit allows the emission of an equivalent of one tonne of carbon dioxide and other greenhouse gases to the environment.
Global emission allotments have been restricted 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 used or traded in the market. Organizations that think they may cross the emission limits can purchase these credits from low-emission industries that have extra credits with them because of adopting cleaner methods of doing business. As high-emission organizations are made to compensate for their act, they are driven to opt for greener technologies.
Market trends in carbon trading suggest that it has turned into the greenhouse gases emission-lowering method of choice for a lot of big industries throughout the globe. This is because such inter-company dealings help in their short-term and medium-term strategies.
Carbon trading is increasing exponentially every year, according to the figures reported by the World Bank’s Carbon Finance Unit. The years 2003 and 2004 witnessed a trading increase of 41% in the market, while the increase in the following cycle has been an unprecedented 240%. Growth in the London centred carbon finance market has also been very impressive, proving the fact that carbon trading is turning out to be a successful business strategy for many companies. 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. In addition, the EU with its own carbon trading system has also been playing a key role in the carbon trading market.
However, this trend has not seen a positive response from a few parties. Carbon trading is in fact aimed at causing high-emission organizations invest in more eco-friendly technologies and thereby promoting development of low emission energy alternatives, which is not happening because errant organisations seem to be more interested in buying carbon credits rather than choosing eco-friendly technologies. Therefore certain groups are apprehensive of the long-term benefits of carbon trading, and some experts ave opined the levying of carbon tax to be paid by errant organizations as a more appropriate solution to greenhouse gas emissions.
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