Carbon trading is a method adopted to decrease the carbon footprints of industrialized nations, and the method has gained wide acceptance throughout the world in recent years. In carbon trading, carbon credits are purchased and sold by industries and other entities across the globe under the innovative cap-and-trade system, where each credit allows the release of an equivalent of one tonne of carbon dioxide and other greenhouse gases to the atmosphere.
According to the Kyoto protocol, a limit has been set on global emission levels, which are then distributed into carbon credits, a certain number of which are granted to each operator. Operators with greener technology often do not use up all of their credits, and as a consequence, can sell these to those who predict that they will be exceeding their allotments. High-emission operators are discouraged for their excessive emissions by this monetary compensation for pollution of the environment.
So far market reports on carbon trading have been positive, with most big industries throughout the globe opting for this emission-lowering mechanism. This is because carbon trading allows them flexibility in their short-term and medium-term planning.
Figures furnished by the World Bank's Carbon Finance Unit confirm that the carbon trading business is growing at a very fast rate every year. The years 2003 and 2004 saw a trading growth of 41% in the market, while the increase 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 business of carbon trading is fetching good profits for several organizations in the world. Despite being outside the Kyoto Protocol list of countries, many states and industries in the US have approved of the carbon credits scheme and have adopted it in their business. The EU too, with its own carbon trading system, has been actively engaged in carbon trading for a few years now.
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 across the globe are actually more willing to buy carbon credits rather than utilizing low emission energy alternatives which has always been one of the objectives of carbon trading. Hence the efficacy of carbon trading has been open to debate, with some environment specialists proposing imposition of carbon tax to be a more suited alternative for achieving an emission-free environment.
According to the Kyoto protocol, a limit has been set on global emission levels, which are then distributed into carbon credits, a certain number of which are granted to each operator. Operators with greener technology often do not use up all of their credits, and as a consequence, can sell these to those who predict that they will be exceeding their allotments. High-emission operators are discouraged for their excessive emissions by this monetary compensation for pollution of the environment.
So far market reports on carbon trading have been positive, with most big industries throughout the globe opting for this emission-lowering mechanism. This is because carbon trading allows them flexibility in their short-term and medium-term planning.
Figures furnished by the World Bank's Carbon Finance Unit confirm that the carbon trading business is growing at a very fast rate every year. The years 2003 and 2004 saw a trading growth of 41% in the market, while the increase 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 business of carbon trading is fetching good profits for several organizations in the world. Despite being outside the Kyoto Protocol list of countries, many states and industries in the US have approved of the carbon credits scheme and have adopted it in their business. The EU too, with its own carbon trading system, has been actively engaged in carbon trading for a few years now.
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 across the globe are actually more willing to buy carbon credits rather than utilizing low emission energy alternatives which has always been one of the objectives of carbon trading. Hence the efficacy of carbon trading has been open to debate, with some environment specialists proposing imposition of carbon tax to be a more suited alternative for achieving an emission-free environment.
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