The words carbon credits and carbon trading often come up in conferences and events on the dangers of global warming, but these terms are still alien to a lot of people. Carbon trading is a system whereby greenhouse gas emissions are limited under the Kyoto Protocol, and these limits are then allotted throughout the world market in such a way as to promote lower emissions or decrease release of carbon dioxide and other greenhouse gases.
Carbon credits are given to industrial units and governments throughout the globe, which allows the owner to discharge a limited amount of CO2 and other greenhouse gases into the air. One carbon credit amounts to one ton of carbon dioxide released in the environment. This basically means that high-emission entities can buy carbon credits from low-emission entities, thereby keeping the net global emissions within the stipulated limit.
The good thing about this system is that companies and industries causing pollution of the environment have to pay for their excesses by means of purchase of carbon credits from the trading market. However, both organizations selling and buying the credits can be found in the carbon credits world market. Therefore the overall economy does not lose out at all, while organizations with eco- friendly mechanisms make more profits. This makes companies shift away from the carbon-intensive approach of manufacturing, and so the emission levels fall.
By permitting the carbon credits to be traded freely on exchanges, it can be made sure that regardless of the size of the organization, greener processes are always rewarded and can be easily monetized. The trading mechanism means that the benefits to greener organizations are instant and huge. Moreover, country-wise allotment of caps makes national administrations more actively encourage local organizations to reduce emissions. This in turn enhances the government's reputation and makes it affirmatively work towards environment protection, something that is immensely efficacious in promoting eco-friendly technologies.
Carbon tax is another option that may be advocated, in which organizations responsible for pollution are penalized but environment friendly industries are not rewarded for low emissions. The efficacy of such schemes is still a matter of debate.
Till date no other system has been able to successfully handle the issue of carbon emissions in a better way than carbon trading. The carbon trading business has witnessed considerable growth in the last few years, and this evidences beyond doubt that the system is impactful.
Carbon credits are given to industrial units and governments throughout the globe, which allows the owner to discharge a limited amount of CO2 and other greenhouse gases into the air. One carbon credit amounts to one ton of carbon dioxide released in the environment. This basically means that high-emission entities can buy carbon credits from low-emission entities, thereby keeping the net global emissions within the stipulated limit.
The good thing about this system is that companies and industries causing pollution of the environment have to pay for their excesses by means of purchase of carbon credits from the trading market. However, both organizations selling and buying the credits can be found in the carbon credits world market. Therefore the overall economy does not lose out at all, while organizations with eco- friendly mechanisms make more profits. This makes companies shift away from the carbon-intensive approach of manufacturing, and so the emission levels fall.
By permitting the carbon credits to be traded freely on exchanges, it can be made sure that regardless of the size of the organization, greener processes are always rewarded and can be easily monetized. The trading mechanism means that the benefits to greener organizations are instant and huge. Moreover, country-wise allotment of caps makes national administrations more actively encourage local organizations to reduce emissions. This in turn enhances the government's reputation and makes it affirmatively work towards environment protection, something that is immensely efficacious in promoting eco-friendly technologies.
Carbon tax is another option that may be advocated, in which organizations responsible for pollution are penalized but environment friendly industries are not rewarded for low emissions. The efficacy of such schemes is still a matter of debate.
Till date no other system has been able to successfully handle the issue of carbon emissions in a better way than carbon trading. The carbon trading business has witnessed considerable growth in the last few years, and this evidences beyond doubt that the system is impactful.
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