Carbon Trading

From Lauraibm

Contents

Articles in the Press

MI Summary

Carbon Trading

Carbon trading is an approach to the control of carbon dioxide emissions by providing economic incentives for their reduction. A central authority—usually a government agency—sets a limit on the amount of pollutant each company can emit. Companies that pollute beyond their allowances must buy credits from those who pollute less than their allowances—or face heavy penalties. This purchase of credits is referred to as a trade.

Text of Article

Emissions trading is an administrative approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants.

In such a plan, a central authority (usually a government agency) sets a limit on the amount of a pollutant that can be emitted. Companies or other groups that emit the pollutant are given allowances which represent the right to emit a specific amount. The total amount of credits cannot exceed the cap, limiting total emissions to that level.

Companies that pollute beyond their allowances must buy credits from those who pollute less than their allowances or face heavy penalties. This transfer is referred to as a trade.

In effect, the buyer is being fined for polluting, while the seller is being rewarded for having reduced emissions. Thus companies that can easily reduce emissions will do so and those for which it is harder will buy credits which reduces greenhouse gasses at the lowest possible cost to society.


Retrieved from "http://editthis.info/Lauraibm/Carbon_Trading"
Personal tools