Carbon Trading Market – Basics And Trends

Carbon trading is a method adopted to decrease the carbon emissions by industrialized countries, and the method has gained wide acceptance throughout the world in recent times. In carbon trading, carbon credits are purchased and sold by industries and other entities throughout the globe under the innovative cap-and-trade system, where each credit allows the release of an equivalent of one thousand kilos of carbon dioxide and other greenhouse gases to the atmosphere.

As per the Kyoto protocol, a cap has been fixed on global emission levels, which are then apportioned into carbon credits, a particular number of which are granted to each operator. Operators with greener technology generally do not consume all of their credits, and as a result, can sell these to those who foresee that they will be going beyond their allotments. As high-emission organizations are made to pay for their act, they are driven to opt for greener technologies.

So far market reports on carbon trading have been positive, with most big industries across the world embracing this emission-lowering mechanism. This is because carbon trading gives them flexibility in their short-term and medium-term planning.

Carbon trading is increasing exponentially each year, as per the figures reported by the World Bank’s Carbon Finance Unit. The years 2003 and 2004 saw a trading growth of 41% in the market, while the increase in the following cycle has been an incredible 240%. The London based carbon finance market has also grown at a remarkable rate, which clearly shows that the business of carbon trading is fetching good profits for many organizations in the world. Even though the US did not sign the Kyoto Protocol, many of its states and industries have taken to the carbon trading practice. In addition, the EU with its own carbon trading system has also been playing a key role in the carbon trading market.

However, some sections of people are not convinced about the effectiveness of carbon trading. Carbon trading is actually aimed at causing high-emission companies invest in greener technologies and thereby promoting development of low emission energy alternatives, which is not materializing because defaulting organisations seem to be more interested in buying carbon credits instead of choosing eco-friendly technologies. Hence the efficacy of carbon trading has remained open to debate, with some environment experts proposing imposition of carbon tax to be a more suited alternative for achieving an emission-free environment.

Discover more about Carbon Trading and Carbon Offset and get a deeper understanding on how you can help in saving the environment.