Carbon trading is a method adopted to decrease the carbon emissions by industrialized nations, and the method has received wide acceptance across the world in recent times. Carbon trading is essentially a trade in carbon credits in which each credit allows the purchaser to release one tonne of carbon dioxide and other greenhouse gases into the atmosphere, and it is the fundamental trading principle governing the cap-and-trade system as devised in the Kyoto Protocol.
The Kyoto protocol has put a cap on how much discharge can be permitted globally, which is later converted into carbon credits, and each operator gets a particular number of these credits. Companies that are left with extra credits due to their adherence to greener alternatives can sell credits to organizations that will fall into the high-emission category for exceeding their authorized limits. As high-emission companies are forced to pay for their act, they are driven to opt for greener technologies.
Market trends in carbon trading indicate that it has turned into the greenhouse gases emission-lowering mechanism of choice for a lot of big corporations throughout the globe. This is because such reciprocal trade makes their near future and medium-term planning more flexible.
Carbon trading is increasing exponentially every year, as per the statistics reported by the World Bank's Carbon Finance Unit. There has been a great increase from 41% to 240% in the carbon trading market between the years 2003 and 2005. Growth in the London based carbon finance market has also been very remarkable, establishing the fact that carbon trading is clearly a profitable business strategy for many companies. Despite being outside the Kyoto Protocol list of nations, several states and industries in the US have approved of the carbon credits scheme and have adopted it in their business. The EU too, with its own carbon trading system, has been actively engaged in carbon trading for a few years now.
However, this trend has not received a positive response from a few parties. The immense growth in the carbon trading business indicates that organizations across the globe are in fact more willing to purchase carbon credits instead of utilizing low emission energy alternatives which has always been one of the objectives of carbon trading. Hence certain groups are apprehensive of the long-term advantages of carbon trading, and some specialists ave opined the levying of carbon tax to be paid by errant companies as a more appropriate solution to greenhouse gas emissions.
