The Fundamentals Of Carbon Credits And Its Benefits
The terms carbon trading and carbon credits are often referred in debates about global warming on a regular basis, but not everyone comprehends what these terms mean. In the carbon trading system, industries have to adhere to the emission limits of greenhouse gases as fixed by the Kyoto Protocol that governs and allocates these limits across nations to encourage regulated emissions or discourage carbon-centric methods of operating industries.
Carbon credits are allocated to industrial units and governments across the world, which allows the owner to discharge a limited quantity of CO2 and other greenhouse gases into the air. One carbon credit means one ton of carbon dioxide emitted in the environment. This implies that low-emission industrial units can sell carbon credits to high-emission industrial units, thereby ensuring a cap on the greenhouse gas emissions in the atmosphere.
This system requires that corporations pay a penalty for greenhouse gas emissions that go beyond reasonable limits, and this penalty on them is implemented by making purchase of carbon credits mandatory for them. However, this is a reciprocal trade where selling and buying of carbon credits are done simultaneously by low and high emission companies. Therefore the economy as a whole does not get affected at all, while companies with environment friendly mechanisms make higher profits. This makes companies shift away from the carbon-intensive approach of manufacturing, and so the emission levels fall.
A company – big or small- that timely opts for a cleaner and greener approach to doing business is certain to be rewarded as carbon credits are transacted on the open bourses and can be bought or sold by anyone. The trading system implies that the benefits to greener companies are immediate and huge. Moreover, nation-wise allotment of limits makes national governments more actively encourage local companies to reduce emissions. This in turn improves the government’s image and makes it proactively work towards environment protection, something that is immensely efficacious in promoting eco-friendly technologies.
Other options like carbon tax are also in place in some parts of the world, which brings to book high emission industries rather than financially incentivising the low emission ones. The success of such systems is quite debatable and issue of contention in several discussions.
Till now no other system has been able to efficiently handle the issue of carbon emissions in a better way than carbon trading. The carbon trading market has seen tremendous growth in the last few years, which a lot of people perceive as evidence that the system works effectively.
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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