As a result of rising anxiety over global warming because of greater carbon emissions in the atmosphere, national administrations and other organizations have been searching for effective solutions to the problem of pollution. Carbon offset and carbon credits trading are some of the mechanisms that are being practised for resolving this problem.
Companies buy carbon credits that are available in the market in the carbon trading system. The credits allow companies to go above their prescribed quota of greenhouse gas emissions and not face a heavy fine for doing so.
The fundamental advantage of the carbon trading method is that it incentivizes reduction in emissions. The system wants businesses to realize that the cost of resorting to ecologically sustainable methods of doing business is lower than the cost of carbon credits. If the firm is made to spend money for emitting the gases then it would attempt to make use of greener techniques to score over other companies. With the number of companies that adhere to this system rising, the amount of total emissions by nations will decrease, thus making the environment cleaner.
A further advantage of carbon trading is the adoption of a market model which is open to all and allows organizations to openly buy and sell carbon credits. As a result of non intrusion from the local administrations such as imposition of fines or making regional laws, this system is more successful.
The biggest drawback however with carbon trading is that an international framework for trading is yet to be formulated. As almost all of the trading happens in the international markets, it is tough for some local companies to adhere to this system.
Some companies are unwilling to opt for this method, as they do not want to make expenditure that cannot be transferred to their customers. In addition, it is quite tough for small companies to get the sophisticated machinery or develop innovative means to reduce the levels of greenhouse gases emitted by them. Hence, they are stuck in a scenario where they have to continue paying for carbon credits year after year, which implies that they can't stand up to bigger organizations in the long run.
Companies buy carbon credits that are available in the market in the carbon trading system. The credits allow companies to go above their prescribed quota of greenhouse gas emissions and not face a heavy fine for doing so.
The fundamental advantage of the carbon trading method is that it incentivizes reduction in emissions. The system wants businesses to realize that the cost of resorting to ecologically sustainable methods of doing business is lower than the cost of carbon credits. If the firm is made to spend money for emitting the gases then it would attempt to make use of greener techniques to score over other companies. With the number of companies that adhere to this system rising, the amount of total emissions by nations will decrease, thus making the environment cleaner.
A further advantage of carbon trading is the adoption of a market model which is open to all and allows organizations to openly buy and sell carbon credits. As a result of non intrusion from the local administrations such as imposition of fines or making regional laws, this system is more successful.
The biggest drawback however with carbon trading is that an international framework for trading is yet to be formulated. As almost all of the trading happens in the international markets, it is tough for some local companies to adhere to this system.
Some companies are unwilling to opt for this method, as they do not want to make expenditure that cannot be transferred to their customers. In addition, it is quite tough for small companies to get the sophisticated machinery or develop innovative means to reduce the levels of greenhouse gases emitted by them. Hence, they are stuck in a scenario where they have to continue paying for carbon credits year after year, which implies that they can't stand up to bigger organizations in the long run.
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