The words carbon credits and carbon trading usually come up in conferences and meets on the dangers of global warming, but these concepts are still unfamiliar to a lot of people. In the carbon trading system, industries have to stick to the emission caps of greenhouse gases as set by the Kyoto Protocol that decides and allocates these limits across nations to encourage regulated emissions or discourage carbon-intensive methods of running industries.
Governments and industries in several countries are allowed a certain number of carbon credits, giving them the right to release a restricted amount of carbon dioxide and other greenhouse gases into the atmosphere. One carbon credit means one ton of carbon dioxide released in the environment. This basically means that high-emission industries can buy carbon credits from low-emission entities, thereby maintaining the net global emissions within the stipulated cap.
The good thing about this system is that companies and industrial units causing pollution of the environment have to compensate 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 overall economy does not get affected at all, while companies with eco- friendly mechanisms make higher profits. This inspires organizations to adopt eco-friendly technologies, and slowly the global level of greenhouse gas emissions declines.
By allowing the carbon credits to be traded freely on global exchanges, it can be ensured that irrespective of the size of the organization, eco-friendly processes are always rewarded and can be conveniently monetized. This trading strategy ensures instant and great rewards for companies with a low emission history. Moreover, as the whole idea has also been expanded to countries, there would always be encouragement to decrease emissions from the respective governments to local companies, which is a great benefit as several governments are often blamed for absence of initiative on environment.
Carbon tax is another alternative that may be implemented, in which companies causing pollution are penalized but eco-friendly industries are not rewarded for low emissions. The efficacy of such schemes is still a matter of debate.
In a short period since its adoption, carbon trading has proven to be the most appropriate means to deal with the issue of carbon emissions. The efficacy of the system is clear from the unparalleled increase in the carbon trading market witnessed in the last few years.
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categories: carbon emission,carbon offset,environment,business,marketing,carbon credits,carbon trading,carbon information,business management consulting
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