Carbon credits and carbon trading are hot topics for debates and discussions on environmental matters, but most of us are not fully acquainted with these terms. In the system of carbon trading, controls are imposed on greenhouse gas emissions under the Kyoto Protocol, and the prescribed emission limits are then distributed across nations, which have to control the greenhouse gas emissions from the various industries and business units operating within them.
National governments and industries are allotted fixed quantities of carbon credits to regulate their emission levels, and the credits certify the owner to release a limited amount of CO2 and other gases into the environment. One carbon credit is equal to one ton of carbon dioxide discharge. This means that low-emission industries can sell carbon credits to high-emission industrial units, thereby creating a cap on the greenhouse gas emissions in the world.
The best thing about this system is that companies and industries causing pollution of the environment have to pay for their excesses in the form of purchase of carbon credits from the trading market. However, for every company that is buying credits, there will be a firm which is selling these credits. Therefore, the world economy remains balanced, while companies least polluting the environment gain financially. This inspires organizations to adopt greener alternatives, and slowly the global rate of greenhouse gas emissions comes down.
A firm - big or small- that timely opts for a more eco-friendly and greener approach to doing business is sure to be rewarded as carbon credits are traded on the open bourses and can be bought or sold by anyone. The trading system means that the advantages to greener companies are instant and substantial. Moreover, with countries and their administration involved in the idea, national governments on their part would have to ask local companies to reduce emissions, and therefore these governments would be pulled out of their conventional stance of indifference towards environmental matters.
Other alternatives like carbon tax are also in place in some parts of the world, which brings to book high emission entities instead of financially incentivising the low emission ones. The effectiveness of such systems is highly debatable and issue of contention at times.
In a short span since its adoption, carbon trading has shown to be the most appropriate means to tackle the problem of carbon emissions. The carbon trading business has seen remarkable growth in the last few years, and this evidences beyond doubt that the system is impactful.
National governments and industries are allotted fixed quantities of carbon credits to regulate their emission levels, and the credits certify the owner to release a limited amount of CO2 and other gases into the environment. One carbon credit is equal to one ton of carbon dioxide discharge. This means that low-emission industries can sell carbon credits to high-emission industrial units, thereby creating a cap on the greenhouse gas emissions in the world.
The best thing about this system is that companies and industries causing pollution of the environment have to pay for their excesses in the form of purchase of carbon credits from the trading market. However, for every company that is buying credits, there will be a firm which is selling these credits. Therefore, the world economy remains balanced, while companies least polluting the environment gain financially. This inspires organizations to adopt greener alternatives, and slowly the global rate of greenhouse gas emissions comes down.
A firm - big or small- that timely opts for a more eco-friendly and greener approach to doing business is sure to be rewarded as carbon credits are traded on the open bourses and can be bought or sold by anyone. The trading system means that the advantages to greener companies are instant and substantial. Moreover, with countries and their administration involved in the idea, national governments on their part would have to ask local companies to reduce emissions, and therefore these governments would be pulled out of their conventional stance of indifference towards environmental matters.
Other alternatives like carbon tax are also in place in some parts of the world, which brings to book high emission entities instead of financially incentivising the low emission ones. The effectiveness of such systems is highly debatable and issue of contention at times.
In a short span since its adoption, carbon trading has shown to be the most appropriate means to tackle the problem of carbon emissions. The carbon trading business has seen remarkable growth in the last few years, and this evidences beyond doubt that the system is impactful.
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