Emissions trading (or emission trading) is an administrative approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants. It is sometimes called cap and trade.A coal power plant in Germany. Due to emissions trading, coal might become less competitive as a fuel.A central authority (usually a government or international body) sets a limit or cap on the amount of a pollutant that can be emitted. Companies or other groups are issued emission permits and are required to hold an equivalent number of allowances (or credits) which represent the right to emit a specific amount. The total amount of allowances and credits cannot exceed the cap, limiting total emissions to that level. Companies that need to increase their emissions must buy credits from those who pollute less. The transfer of allowances is referred to as a trade. In effect, the buyer is paying a charge for polluting, while the seller is being rewarded for having reduced emissions by more than was needed. Thus, in theory, those that can easily reduce emissions most cheaply will do so, achieving the pollution reduction at the lowest possible cost to society.[1] There are active trading programs in several pollutants. For greenhouse gases the largest is the European Union Emission Trading Scheme.[2] In the United States there is a national market to reduce acid rain and several regional markets in nitrous oxide.[3] Markets for other pollutants tend to be smaller and more localized.Carbon Trading is sometimes seen as a better approach than a direct carbon tax or direct regulation. By solely aiming at the cap it avoids the consequences and compromises that often accompany those other methods. It can be cheaper, and politically preferable for existing industries because the initial allocation of allowances is often allocated with a grandfathering provision where rights are issued in proportion to historical emissions. In addition, most of the money in the system is spent on environmental activities, and the investment directed at sustainable projects that earn credits in the developing world can contribute to the Millennium Development Goals. Critics of emissions trading point to problems of complexity, monitoring, enforcement, and sometimes dispute the initial allocation methods and cap.[4]The carbon trade came about in response to the Kyoto Protocol. Signed in Kyoto, Japan, by some 180 countries in December 1997, the Kyoto Protocol calls for 38 industrialized countries to reduce their greenhouse gas emissions between the years 2008 to 2012 to levels that are 5.2% lower than those of 1990.Carbon is an element stored in fossil fuels such as coal and oil. When these fuels are burned, carbon dioxide is released and acts as what we term a "greenhouse gas".The idea behind carbon trading is quite similar to the trading of securities or commodities in a marketplace. Carbon would be given an economic value, allowing people, companies or nations to trade it. If a nation bought carbon, it would be buying the rights to burn it, and a nation selling carbon would be giving up its rights to burn it. The value of the carbon would be based on the ability of the country owning the carbon to store it or to prevent it from being released into the atmosphere. (The better you are at storing it, the more you can charge for it.)A market would be created to facilitate the buying and selling of the rights to emit greenhouse gases. The industrialized nations for which reducing emissions is a daunting task could buy the emission rights from another nation whose industries do not produce as much of these gases. The market for carbon is possible because the goal of the Kyoto Protocol is to reduce emissions as a collective.On the one hand, carbon trading seems like a win-win situation: greenhouse gas emissions may be reduced while some countries reap economic benefit. On the other hand, critics of the idea suspect that some countries will exploit the trading system and the consequences will be negative. While carbon trading may have its merits, debate over this type of market is inevitable, since it involves finding a compromise between profit, equality and ecological concerns Carbon trading involves the creation and transfer of carbon rights from one party to another. The trade requires the measurement, allocation and reporting of these carbon rights or "carbon credits" (to an agreed standard). The GGAS allows accredited abatement certificate providers to create NGACs that can be traded or sold to other parties who need additional credits to meet their emissions target.
Problem: Carbon emissions into the earth’s atmosphere have resulted in drastic climatic changes. Though, we have both, firm believers who blame Industries outright for polluting the atmosphere resulting in some of natures shocking disasters and some who believe its difficult to blame carbon emissions being responsible for these climatic changes as its hard to find a pattern over the past billion years or so how climate has changed.
Though, both have strong points to back their beliefs, whenever I see smoke coming out of chimney, i belive its not good for the environment.
Solution: NGOs or non-profit organizations for long have been screaming for everybody’s attention towards this huge problem, but no one seems to care enough, not until there is a financial incentive attached to it. That’s what the governments of various countries have been trying to come up with, a trading mechanism where companies gain a monetary benefit out of polluting the air less. Kyoto protocol’s goal is exactly that. The idea is to divide the whole world into two, one who can afford making changes to their existing infrastructure and the ones who cannot. As everybody is polluting, be it a developed country or a developing country, the financial aspect has to be kept in mind. All developed countries will have to cut down their emissions by some x percentage or else they pay heavy fines. Now, one way of measuring how much they are polluting the air less, is by clean each tonne reduction of CO2 a unit and a company must own those amounts of units at the end of every period.
posted @ 6:33 PM |