Carbon trading is a method adopted to reduce the carbon emissions by industrialized countries, and the method has received wide approval across the world in recent years. In carbon trading, carbon credits are purchased and sold by industries and other entities throughout the world under the innovative cap-and-trade system, where one credit permits the emission of an equivalent of one tonne of carbon dioxide and other greenhouse gases to the atmosphere.
The Kyoto protocol has fixed a limit on how much emission can be permitted globally, which is later converted into carbon credits, and each operator gets a particular number of these credits. Companies that have a stock of credits due to their adherence to cleaner alternatives can sell credits to organizations that will fall into the high-emission segment for going above their authorized limits. As high-emission organizations are forced to compensate for their act, they are driven to look for cleaner technologies.
So far carbon trading has been an effective system, with market responses indicating that most large companies throughout the globe are advocating this emission-lowering system. This is because carbon trading gives them flexibility in their short-term and medium-term planning.
If the figures of the World Bank's Carbon Finance Unit are to be believed, then carbon trading is increasing at a great rate with each passing year. The years 2003 and 2004 witnessed a trading growth of 41% in the market, while the increase in the following cycle has been an incredible 240%. The carbon finance market, based in London, has also seen immense growth, which clearly suggests that the trade of carbon credits has turned out to be a profitable business for many companies. Even though the US did not sign the Kyoto Protocol, many of its states and industries have taken to the carbon trading practice. Further, 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. The immense growth in the carbon trading business indicates that organizations throughout the globe are in fact more eager to purchase carbon credits instead of investing in low emission energy alternatives which has always been one of the goals of carbon trading. Therefore the efficacy of carbon trading has remained open to speculation, with some environment experts proposing imposition of carbon tax to be a more suited alternative for attaining an emission-free environment.
The Kyoto protocol has fixed a limit on how much emission can be permitted globally, which is later converted into carbon credits, and each operator gets a particular number of these credits. Companies that have a stock of credits due to their adherence to cleaner alternatives can sell credits to organizations that will fall into the high-emission segment for going above their authorized limits. As high-emission organizations are forced to compensate for their act, they are driven to look for cleaner technologies.
So far carbon trading has been an effective system, with market responses indicating that most large companies throughout the globe are advocating this emission-lowering system. This is because carbon trading gives them flexibility in their short-term and medium-term planning.
If the figures of the World Bank's Carbon Finance Unit are to be believed, then carbon trading is increasing at a great rate with each passing year. The years 2003 and 2004 witnessed a trading growth of 41% in the market, while the increase in the following cycle has been an incredible 240%. The carbon finance market, based in London, has also seen immense growth, which clearly suggests that the trade of carbon credits has turned out to be a profitable business for many companies. Even though the US did not sign the Kyoto Protocol, many of its states and industries have taken to the carbon trading practice. Further, 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. The immense growth in the carbon trading business indicates that organizations throughout the globe are in fact more eager to purchase carbon credits instead of investing in low emission energy alternatives which has always been one of the goals of carbon trading. Therefore the efficacy of carbon trading has remained open to speculation, with some environment experts proposing imposition of carbon tax to be a more suited alternative for attaining an emission-free environment.
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