In an effort to improve on the reduction of green house gases into the atmosphere many countries have come up with a market based approach known as carbon trading. So how does carbon trading work? And what are some carbon trading pros and cons? Carbon trading involves a regulating body and several companies. The regulating body sets a cap of how much aggregate carbon can be emitted into the atmosphere and then either auctions off or gives away a certain amount of carbon permits to each business equaling the aggregate amount. If a certain company is over their limit they can either reduce their emissions or buy credits from a company that has extra carbon credits. Companies with left over credits can either sell them on the market or bank them for future use.
There are several carbon trading markets within various countries such as the European union emission trading scheme. The European union emission trading scheme began in 2005 and requires mandatory participation of its members. One of the several carbon trading pros is that it allows the market to dictate when and where emissions can be reduced rather than strict government control. Other carbon trading pros are that it rewards companies who are environmentally friendly and encourages companies who lag behind to reduce their emissions. Another benefit is carbon trading deals involving forestry projects in developing countries can help reduce poverty while at the same time reduce greenhouse gas emission. The carbon trading pros outweigh the cons as the various markets move forward to reduce emissions.
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