What is carbon trading?
Carbon trading is a practice that is designed to reduce the total carbon dioxide emissions, along with other greenhouse gases, providing regulatory and economic motivation. The term "carbon trading" is actually a bit misleading, because a number of greenhouse emissions can be regulated according to the so -called CAP and Trade systems. For this reason, some people prefer the concept of "emissions" to emphasize the fact that trading is much more than just carbon. Within the ceiling and the business system, the government sets a national objective for total greenhouse gas emissions for a specified period of time, such as a quarter or year, and then allocates "credits" to companies that allow them to emit a certain amount of greenhouse gases. If the company is unable to use all its credits, it can sell or trade these credits with a company that is afraid to exceed its contribution.
Carbon Trading provides companies a very obvious incentive to improve their efficiency and reduce theirgreenhouse gas emissions by turning such a reduction to physical monetary benefits. In addition, it is discouraging that it is ineffective because companies are effectively penalized for failure to meet the targets of emissions. In this way, regulation is largely carried out by economic means, rather than through draconian government measures that encourage people to engage in carbon trading because it is potentially profitable.
In general, carbon trading is paired with an overall attempt to reduce carbon emissions in the country for a longer period of time, which means that each year the number of credits is reduced. By encouraging companies to become more efficient in advance, the government can often meet the goals of emission reduction more easily, as companies will not be exposed to change practices overnight and the carbon trading system creates much greater flexibility than setting the basic levels.
In some countries, carbon exchanges opened and worked similarly to stock exchanges. These organizations make it easier to replace carbon credits and ensure that they flow smoothly by the market, and provide standard credits for credits based on market demand and general economic health. In some cases, individual citizens can also participate in carbon trading, credit purchases to compensate for their own greenhouse gas emissions, and some advocates have proposed that carbon trading should be formally extended to all citizens, which would encourage global and individual involvement in greenhouse gas emissions.