20 Feb 10 Carbon Credits And Its Benefits

Carbon credits and carbon trading are common topics for debates and conventions on environmental issues, but a majority of us are not completely acquainted with these concepts. Carbon trading is a system whereby greenhouse gas emissions are limited under the Kyoto Protocol, and these caps are then allocated throughout the global market in such a way as to promote lower emissions or decrease release of carbon dioxide and other greenhouse gases.

Carbon credits are allocated to industries and governments across the world, which authorizes the owner to discharge a limited quantity of CO2 and other greenhouse gases into the air. One carbon credit is equal to one ton of carbon dioxide discharge. This implies companies and industries can engage in buying and selling of carbon credits based on their respective levels of emissions, thereby keeping the entire world’s emission rate within safe limits.

The key advantage of carbon trading is that it results in a scenario where organizations tending to go beyond their emission allowances have to make payment of a substantial amount to do so, as they have to buy carbon credits from the market. However, this is a quid pro quo trade where selling and buying of carbon credits are done simultaneously by low and high emission companies. Hence the balance in global economy is sustained, while entities with low emission records make profits. This inspires companies to adopt greener alternatives, and slowly the global rate of greenhouse gas emissions comes down.

Free trade of carbon credits on world exchanges enables greener energy and process usage of a company to be incentivised and capitalized, whether the organization is a small one or a large one. This trading system ensures immediate and great rewards for companies with a low emission history. Moreover, nation-wise allotment of caps makes national governments more actively encourage local companies to reduce emissions. This in turn improves the government’s image and makes it affirmatively work towards environment conservation, something that is greatly efficacious in promoting green technologies.

Other options like carbon tax are also implemented in some countries of the world, which penalises high emission organizations instead of financially incentivising the low emission ones. The effectiveness of such schemes is still an issue of debate.

In a short period since its inception, carbon trading has shown to be the most appropriate means to tackle the issue of carbon emissions. The effectiveness of the system is evident from the unparalleled growth in the carbon trading market noted in the last few years.

Learn more about carbon credits and carbon offset and get a deeper understanding on how you can help in saving the environment.

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