The terms carbon trading and carbon credits are often referred in debates about global warming everywhere, but not everyone understands what is meant by these words. Carbon trading is a system under which greenhouse gas emissions are limited under the Kyoto Protocol, and these limits are then allocated throughout the global market in such a way as to promote lower emissions or decrease release of carbon dioxide and other greenhouse gases.
Carbon credits are given to industrial units and governments throughout the globe, which allows the owner to discharge a limited amount of CO2 and other greenhouse gases into the atmosphere. One carbon credit means one ton of carbon dioxide released in the environment. This means that low-emission industrial units can sell carbon credits to high-emission corporations, thereby ensuring a cap on the greenhouse gas emissions in the atmosphere.
The key benefit of carbon trading is that it results in a scenario where organizations tending to go beyond their emission limits have to make payment of a significant amount to do so, as they have to buy carbon credits from the market. However, for every company that is purchasing credits, there will be a firm which is selling these credits. Hence the balance in world economy is sustained, while entities with low emission records make profits. This makes organizations move away from the carbon-intensive approach of manufacturing, and so the emission levels decrease.
Open trade of carbon credits on world exchanges enables greener energy and process usage of an organization to be incentivised and capitalized, whether the organization is a small one or a large one. Trade in carbon credits gets instant and substantial advantages for companies with low emissions. Moreover, the entire concept has also been extended to countries, there would always be encouragement to decrease emissions from the national governments to local businesses, which is a great advantage as many governments are usually blamed for lack of initiative on environment.
Carbon tax is another option that may be advocated, in which organizations causing pollution are punished but environment friendly organizations are not rewarded for low emissions. The efficacy of such systems is still an issue of debate.
So far carbon trading has been most effective as a method and within a short span has been able to successfully address the problem of high carbon emissions. The carbon trading market has seen tremendous growth in the past few years, which most people perceive as proof that the system works quite well.
Carbon credits are given to industrial units and governments throughout the globe, which allows the owner to discharge a limited amount of CO2 and other greenhouse gases into the atmosphere. One carbon credit means one ton of carbon dioxide released in the environment. This means that low-emission industrial units can sell carbon credits to high-emission corporations, thereby ensuring a cap on the greenhouse gas emissions in the atmosphere.
The key benefit of carbon trading is that it results in a scenario where organizations tending to go beyond their emission limits have to make payment of a significant amount to do so, as they have to buy carbon credits from the market. However, for every company that is purchasing credits, there will be a firm which is selling these credits. Hence the balance in world economy is sustained, while entities with low emission records make profits. This makes organizations move away from the carbon-intensive approach of manufacturing, and so the emission levels decrease.
Open trade of carbon credits on world exchanges enables greener energy and process usage of an organization to be incentivised and capitalized, whether the organization is a small one or a large one. Trade in carbon credits gets instant and substantial advantages for companies with low emissions. Moreover, the entire concept has also been extended to countries, there would always be encouragement to decrease emissions from the national governments to local businesses, which is a great advantage as many governments are usually blamed for lack of initiative on environment.
Carbon tax is another option that may be advocated, in which organizations causing pollution are punished but environment friendly organizations are not rewarded for low emissions. The efficacy of such systems is still an issue of debate.
So far carbon trading has been most effective as a method and within a short span has been able to successfully address the problem of high carbon emissions. The carbon trading market has seen tremendous growth in the past few years, which most people perceive as proof that the system works quite well.
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Learn more about Carbon Credits and Carbon Trading to get a deeper understanding on how you can help in saving the environment.
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