The carbon trading concept came out of the need to cut down on greenhouse gas emissions, and has become more and more popular throughout the world in recent years. Carbon trading is essentially a trade in carbon credits in which each credit permits the owner to discharge one tonne of carbon dioxide and other greenhouse gases into the air, and it is the fundamental trading principle governing the cap-and-trade system as devised in the Kyoto Protocol.
As per the Kyoto protocol, a limit has been set on global emission allowances, which are then apportioned into carbon credits, a particular number of which are allotted to each member. Operators with more eco-friendly technology generally do not consume all of their credits, and as a consequence, can sell these to those who foresee that they will be exceeding their allotments. As high-emission organizations are forced to compensate for their act, they are driven to look for greener technologies.
So far carbon trading has been a success, with market responses suggesting that several large industries across the world are advocating this emission-lowering solution. This is because such quid pro quo trade makes their near future and medium-term planning more accommodating.
Figures furnished by the World Bank's Carbon Finance Unit reaffirm that the carbon trading business is growing at a very rapid rate every year. There was a 41% rise in the market between 2003 and 2004, and a staggering 240% rise between 2004 and 2005. The carbon finance market, based in London, has also seen immense growth, which clearly suggests that the trade of carbon credits is proving to be a profitable business for many companies. Several states and industries in the US have also adopted carbon trading practices, even though the country is not a signatory to the Kyoto Protocol. Besides, the EU with its own carbon trading system has also been performing a major role in the carbon trading market.
However, there are some groups who have criticised this policy. The immense growth in the carbon trading business suggests that organizations across the globe are actually more willing to purchase carbon credits rather than utilizing low emission energy alternatives which has always been one of the goals of carbon trading. Hence, carbon trading has been a matter of discussion in several parts of the world, and some specialists are of the belief that options like taxation on excessive carbon emissions is the more suited way to regulate the greenhouse gas emissions.
As per the Kyoto protocol, a limit has been set on global emission allowances, which are then apportioned into carbon credits, a particular number of which are allotted to each member. Operators with more eco-friendly technology generally do not consume all of their credits, and as a consequence, can sell these to those who foresee that they will be exceeding their allotments. As high-emission organizations are forced to compensate for their act, they are driven to look for greener technologies.
So far carbon trading has been a success, with market responses suggesting that several large industries across the world are advocating this emission-lowering solution. This is because such quid pro quo trade makes their near future and medium-term planning more accommodating.
Figures furnished by the World Bank's Carbon Finance Unit reaffirm that the carbon trading business is growing at a very rapid rate every year. There was a 41% rise in the market between 2003 and 2004, and a staggering 240% rise between 2004 and 2005. The carbon finance market, based in London, has also seen immense growth, which clearly suggests that the trade of carbon credits is proving to be a profitable business for many companies. Several states and industries in the US have also adopted carbon trading practices, even though the country is not a signatory to the Kyoto Protocol. Besides, the EU with its own carbon trading system has also been performing a major role in the carbon trading market.
However, there are some groups who have criticised this policy. The immense growth in the carbon trading business suggests that organizations across the globe are actually more willing to purchase carbon credits rather than utilizing low emission energy alternatives which has always been one of the goals of carbon trading. Hence, carbon trading has been a matter of discussion in several parts of the world, and some specialists are of the belief that options like taxation on excessive carbon emissions is the more suited way to regulate the greenhouse gas emissions.
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