The carbon trading concept came out of the necessity to decrease greenhouse gas emissions, and has become increasingly popular across the globe in recent years. Carbon trading involves the sale and purchase of carbon credits, where every single credit allows the emission of one thousand kilos of carbon dioxide and other greenhouse gases to the buyer, and is the key component of the cap-and-trade system implemented in several countries which adhere to the Kyoto Protocol.
The Kyoto protocol has fixed a limit on how much discharge can be permitted globally, which is later converted into carbon credits, and each operator gets a particular amount of these credits. Organizations that feel they may go beyond the emission limits can buy these credits from low-emission companies that have extra credits with them because of opting for cleaner methods of doing business. By having to make payment of an extra sum to be allowed to make those emissions, a de-motivating factor is made for high-emission operators.
Market trends in carbon trading indicate that it has turned into the greenhouse gases emission-lowering method of choice for most big industries across the world. This is because carbon trading gives them flexibility in their short-term and medium-term strategies.
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. Growth in the London centred carbon finance market has also been very impressive, establishing the fact that carbon trading is clearly a successful business strategy for a number of organizations. Several states and industries in the US have also adopted carbon trading practices, even though the nation is not a signatory to the Kyoto Protocol. 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. The stupendous increase in the carbon trading business indicates that companies throughout the world are actually more willing to buy carbon credits instead of investing in low emission energy alternatives which has always been one of the objectives of carbon trading. Thus, carbon trading has been a topic of discussion in many parts of the world, and some specialists are of the belief that alternatives like taxation on excessive carbon emissions is the more suited way to regulate the greenhouse gas emissions.
The Kyoto protocol has fixed a limit on how much discharge can be permitted globally, which is later converted into carbon credits, and each operator gets a particular amount of these credits. Organizations that feel they may go beyond the emission limits can buy these credits from low-emission companies that have extra credits with them because of opting for cleaner methods of doing business. By having to make payment of an extra sum to be allowed to make those emissions, a de-motivating factor is made for high-emission operators.
Market trends in carbon trading indicate that it has turned into the greenhouse gases emission-lowering method of choice for most big industries across the world. This is because carbon trading gives them flexibility in their short-term and medium-term strategies.
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. Growth in the London centred carbon finance market has also been very impressive, establishing the fact that carbon trading is clearly a successful business strategy for a number of organizations. Several states and industries in the US have also adopted carbon trading practices, even though the nation is not a signatory to the Kyoto Protocol. 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. The stupendous increase in the carbon trading business indicates that companies throughout the world are actually more willing to buy carbon credits instead of investing in low emission energy alternatives which has always been one of the objectives of carbon trading. Thus, carbon trading has been a topic of discussion in many parts of the world, and some specialists are of the belief that alternatives like taxation on excessive carbon emissions is the more suited way to regulate the greenhouse gas emissions.
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