Float through any social event with M's fast facts. This week John Mather explains carbon trading.
Carbon trading: the facts
Float through any social event with M's fast facts. This week John Mather explains carbon trading. THE BASICS Emissions trading, also known as cap and trade, is a popular though controversial method to reduce greenhouse gas emissions. Governments cap the amount of gases, usually carbon-based, that a company can emit. If the company falls below the cap, it earns credits it can then sell on to firms who exceed the cap. As the caps get smaller, the Earth - the theory goes - becomes healthier. The UK is implementing a cap-and-trade regime beginning this week.
THE PITCH Any climate-change solution needs to accommodate business and industry. Cap and trade does this. Companies that cannot meet emission standards essentially pay a fine, creating an incentive to develop greener practices. Under some systems, people can buy offset credits and then refuse to re-sell them to over-the-cap emitters - what's known as "retiring credits". The size of the carbon trading market was estimated at Dh40 million in 2009.
THE REBUTTAL If a free-market economy exacerbated the problem, then a free-market solution isn't sound. For instance, not all countries have signed on to cap-and-trade or emissions reductions, meaning their commodities - produced without cap-and-trade constraints - will probably be cheaper and, consequently, in greater demand. Also the price of going over the cap, whether from sanctions or buying credits, might be lower than the practical costs of emitting less. THE CONVERSATION Don't bother - just watch An Inconvenient Truth.
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