Carbon trading came forth as a regulatory mechanism to control CO2 emissions, and it has increasingly caught the attention of governments and industries throughout the world. In carbon trading, carbon credits are purchased and sold by industries and organizations throughout the world under the innovative cap-and-trade system, where each credit allows the release of an equivalent of one thousand kilos of carbon dioxide and other greenhouse gases to the environment.
According to the Kyoto protocol, a limit has been set on global emission allowances, which are then distributed into carbon credits, a particular number of which are allotted to each operator. Companies that feel they may cross the emission limits can purchase these credits from low-emission companies that have extra credits with them because of adopting cleaner methods of doing business. High-emission operators are discouraged for their high emissions by this monetary compensation for pollution of the atmosphere.
So far market responses on carbon trading have been positive, with most large organizations throughout the globe embracing this emission-lowering method. This is because carbon trading allows them flexibility in their short-term and medium-term planning.
Statistics furnished by the World Bank's Carbon Finance Unit confirm that the carbon trading business is increasing at a very fast rate every year. The years 2003 and 2004 saw a trading growth of 41% in the market, while the growth in the following cycle has been an unprecedented 240%. The London based carbon finance market has also grown at an amazing rate, which makes it evident that the method of carbon trading is fetching good profits for many industries in the world. Several states and industries in the US have also adopted carbon trading practices, even though the country is not a signatory to the Kyoto Protocol. Additionally, the EU, which has its own carbon trading market, has also been very participative in this global trading market.
However, some sections of people are not convinced about the effectiveness of carbon trading. Carbon trading is in fact targeted at making high-emission companies invest in more eco-friendly technologies and thereby promoting development of low emission energy substitutes, which is not materializing because defaulting organisations seem to be keener on buying carbon credits instead of opting for eco-friendly technologies. Thus, carbon trading has been a topic of debate in several parts of the world, and some experts are of the belief that alternatives like taxation on excessive carbon emissions is the better way to regulate the greenhouse gas emissions.
According to the Kyoto protocol, a limit has been set on global emission allowances, which are then distributed into carbon credits, a particular number of which are allotted to each operator. Companies that feel they may cross the emission limits can purchase these credits from low-emission companies that have extra credits with them because of adopting cleaner methods of doing business. High-emission operators are discouraged for their high emissions by this monetary compensation for pollution of the atmosphere.
So far market responses on carbon trading have been positive, with most large organizations throughout the globe embracing this emission-lowering method. This is because carbon trading allows them flexibility in their short-term and medium-term planning.
Statistics furnished by the World Bank's Carbon Finance Unit confirm that the carbon trading business is increasing at a very fast rate every year. The years 2003 and 2004 saw a trading growth of 41% in the market, while the growth in the following cycle has been an unprecedented 240%. The London based carbon finance market has also grown at an amazing rate, which makes it evident that the method of carbon trading is fetching good profits for many industries in the world. Several states and industries in the US have also adopted carbon trading practices, even though the country is not a signatory to the Kyoto Protocol. Additionally, the EU, which has its own carbon trading market, has also been very participative in this global trading market.
However, some sections of people are not convinced about the effectiveness of carbon trading. Carbon trading is in fact targeted at making high-emission companies invest in more eco-friendly technologies and thereby promoting development of low emission energy substitutes, which is not materializing because defaulting organisations seem to be keener on buying carbon credits instead of opting for eco-friendly technologies. Thus, carbon trading has been a topic of debate in several parts of the world, and some experts are of the belief that alternatives like taxation on excessive carbon emissions is the better way to regulate the greenhouse gas emissions.
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