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Market Trends In Carbon Emissions Trading

08.13.2009 · Posted in Home and Garden Articles

Carbon trading is a method adopted to decrease the carbon footprints of industrialized nations, and the method has gained wide approval across the world in recent times. In carbon trading, carbon credits are purchased and sold by companies and other entities throughout the world under the innovative cap-and-trade system, where each credit allows the emission of an equivalent of one thousand kilos of carbon dioxide and other greenhouse gases to the environment.nnAs per the Kyoto protocol, a cap has been set on global emission allowances, which are then apportioned into carbon credits, a particular number of which are granted to each member. Operators with more eco-friendly technology often do not use up all of their credits, and as a result, can sell these to those who predict that they will be going beyond their allotments. By having to pay an additional sum to be permitted to make those discharges, a de-motivating factor is made for high-emission operators.nnSo far market reports on carbon trading have been positive, with most large organizations throughout the world embracing this emission-lowering method. This is because such inter-company transactions help in their short-term and medium-term planning.nnIf the figures of the World Bank’s Carbon Finance Unit are to be believed, then carbon trading is growing at a great rate with each passing year. There was a 41% increase in the market between 2003 and 2004, and a staggering 240% growth between 2004 and 2005. The carbon finance market, centred in London, has also seen stupendous growth, which clearly indicates that the exchange of carbon credits is proving to be a profitable business for many companies. Many states and industries in the US have also adopted carbon trading practices, even though the country is not a signatory to the Kyoto Protocol. The EU too, with its own carbon trading system, has been actively engaged in carbon trading for some years now.nnHowever, this system has not received a favourable response from a few parties. The immense growth in the carbon trading business indicates that organizations across the globe are actually more willing to purchase carbon credits rather than utilizing low emission energy alternatives which has always been one of the goals of carbon trading. Hence the efficacy of carbon trading has remained open to debate, with some environment specialists suggesting imposition of carbon tax to be a more suited alternative for achieving a clean environment.

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