The Booming Carbon Trading Market

Carbon trading was born out of the need to decrease greenhouse gas emissions, and has become increasingly popular throughout the world in recent years. Carbon trading involves the selling and buying of carbon credits, where every single credit allows the emission of one thousand kilos of carbon dioxide and other greenhouse gases to the purchaser, and is the primary component of the cap-and-trade system in use in several countries which are bound by the Kyoto Protocol.

Global emission allowances have been capped by the Kyoto protocol, and the caps are distributed as carbon credits to each operator, who gets a particular amount of these credits that can be consumed or traded in the market. Operators with more eco-friendly technology often do not consume all of their credits, and as a consequence, can sell these to those who foresee that they will be exceeding their allotments. By having to make payment of an extra sum to be allowed to make those discharges, a de-motivating factor is made for high-emission operators.

So far carbon trading has been a success, with market responses suggesting that several large companies across the globe are advocating this emission-lowering solution. This is because such inter-company transactions help in their short-term and medium-term strategies.

Carbon trading is rising exponentially every year, according to the statistics reported by the World Bank’s Carbon Finance Unit. There has been an amazing growth from 41% to 240% in the carbon trading market between the years 2003 and 2005. The London based carbon finance market has also grown at a remarkable rate, which makes it evident 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. The EU too, with its own carbon trading system, has been actively engaged in carbon trading for some years now.

However, this trend has not received a favourable response from some parties. The stupendous growth in the carbon trading business suggests that organizations across the world are actually more willing to purchase carbon credits instead of utilizing low emission energy options which has always been one of the goals of carbon trading. Thus, carbon trading has been a matter of discussion in many parts of the world, and some experts are of the opinion that options like taxation on extra carbon emissions is the better way to regulate the greenhouse gas emissions.

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