Carbon Credits - The Carrot for low Carbon emission

Carbon trading is a system whereby greenhouse gas emissions are limited under the Kyoto Protocol, and these caps are then allocated throughout the world market in such a way as to promote lower emissions or lessen release of carbon dioxide and other greenhouse gases.

Carbon credits are allocated to industrial units and governments across the globe, which authorizes the owner to discharge a limited amount of CO2 and other greenhouse gases into the atmosphere. One carbon credit amounts to the emission of one ton of carbon dioxide. This essentially entails that high-emission industries can buy carbon credits from low-emission organizations, thereby keeping the net global emissions within the stipulated cap.

Open buying and selling of carbon credits on stock exchanges allows greener energy and process usage of an organization to be incentivised and capitalized, whether the organization is a small one or a big one. Trade in carbon credits gets instant and substantial benefits for organizations with low emissions. Moreover, as the whole idea has also been expanded to countries, there would always be incentives to reduce emissions from the respective governments to local businesses, which is a great advantage as many governments are many times blamed for lack of initiative on environment.

So far carbon trading has been most successful as a method and within a short span has been able to successfully address the issue of high carbon emissions. The carbon trading business has seen remarkable growth in the last few years, and this evidences beyond doubt that the system is impactful.

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