How Carbon Trading Works | RMIT University

[Title – How carbon trading works]>>ADJUNCT PROFESSOR ALAN PEARS:
At present, people who emit greenhouse gases, such as carbon dioxide, into the earth’s
atmosphere don’t pay for the damage they
do or cover the cost of repairing it. A carbon price is meant to make emitting greenhouses
gases into the atmosphere more expensive and to
make reducing emissions by doing things like saving energy, investing
in renewable energy, planting trees, more financially
attractive. There are already a number of countries that
have successful carbon trading schemes in place. Only a small number of large, high emission
businesses will have to participate in carbon trading, which
will mean buying and trading permits. But this is a very small
percentage of the businesses in our economy, maybe one percent. So how does carbon trading actually work? Well, first of all, the government sets a
cap on greenhouse gas emissions each year and, over time, it tightens
that cap so that less pollution is allowed to occur. Each of the participants in the trading scheme
has to buy enough permits to match the amount of greenhouse
emissions that they produce and every year they have
to hand over those permits to the government regulator. The key to carbon trading is the balance between
supply and demand of the carbon permits. If greenhouse
gas emissions look like they are increasing beyond the cap
that the government has set, then the price of permits will increase and
it will be more expensive to pollute. So, the companies that find it cheapest to
cut their emissions will have a stronger financial incentive to do
that. And that will mean they either have to buy fewer permits, or
if they’ve already bought the permits, they will be able to sell them
to other companies at a profit because the carbon prices are now higher.
In this way, the carbon trading scheme encourages the cheapest emission reduction for our economy, because
the companies that can cut their emissions most cheaply are the ones
that do it and the ones that find it expensive to cut their emissions are able
to simply buy permits that the other companies don’t need. [End credit]

2 thoughts on “How Carbon Trading Works | RMIT University

  1. it's the process of financialization nature because there no money left in mortgage leveraging, it's got nothing to do with sustainability, it's got nothing to do with environmental protection.

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