Carbon Emission Trading Final

8/2/2019 Carbon Emission Trading Final

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Carbon Emission Trading

Carbon emission trading is about the trading of carbon dioxide that currently constitutes the bulk of

emission trading. This kind of trading has started in among the developed countries which in order

aim at the reducing that carbon emission in to the atmosphere that creates climatic changes and

ecological imbalance in the environment. This carbon trading was rather to reduce the emission. It is

necessary to avoid the climate changes.

UN frame work was adopted by the nations around the world on 9 th may 1992 on climate changes.

This was called as the initial step taken towards global warming complex environmental issue was

persisting. The second step was taken after five years that was on December 1997 when the nations

adopted the Kyoto Protocol. The objective of adopting this protocol was to decrease the emission of

green house gases in to the atmosphere by means of new approach which causes threat to the

climatic changes.

The carbon trade came in to existence in accordance with Kyoto Protocol. It is an agreement signedin Kyoto in Japan where 180 countries were called to sign the agreement agreeing to reduce the

carbon emission. Were 38 industrialized countries were called by Kyoto to reduce the carbon

emission by 5.2% between the year 2008 to 2012 compared to the carbon emission during 1990s.

The need for the carbon trading is that like buying and selling the commodities the carbon was also

start as trade here countries were agreed to have license of carbon emission where they can buy as

well as sell. If a country has carbon emission less than what they have license they can sell their

capacity to other country who feel they have more emission. This in simple called as carbon emission

trading. In other word the carbon would be give an economic value which allows the company and

nations to buy and sell carbon. Its not buying or selling the carbon gas it is the rights to emit the

carbon. It depends on the countries capacity to store without allowing it to enter the atmosphere.

The more capacity to store the more nations can charge.

This scheme was started on January 2005, involving 25 member states. This process is classified into

phases; first phase was between the years 2005 2007 it is concentrated on reducing the Carbon

dioxide gas by method of carbon trading. Subsequently the second phase started to run from the

year 2008-2012 as to coincide with Initial commitment to Kyoto protocol.

The top scientists Thomas Karl and Kevin Trenbreth who where designated as director of NOOAs

National climatic Data center and Head of Climate Analysis Section at National Center for

Atmospheric Research defined the climatic change: There is no doubt that composition ofatmosphere is changes due to human activities and the green house gases are the largest human

influence on global climate, (Karl, Trenberth, 2003). It is said that between 1990 and 2100

Probability for rise in global temperature is by 1.7 to 4.9 degree Celsius due to the human

activity.(NACR, 2003) Scientist have started to relate the concentration of carbon dioxide in the

atmosphere to the global warming and eventually to the climatic changes. It is to be noticed from

this that 45% of carbon dioxide emission is by the developed countries which the main green house

gas that causes global warming. The most of the warming observed in last 50 years is due to the

human activity this is evidence from IPCC (IPCC Third Assessment Report. Summary for

Policymakers, 2001). The fast growth of industrialization and increasing demand for the energy

resource is main fact for increase in carbon dioxide concentration in the atmosphere. The BBC report

on the data presented by UN commission shows the increase in carbon dioxide emission among the


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41 industrialized nations is 2.4% within the period 2000 and 2004. This has create threat to climate

change which eventually as threatening to human life and imbalance in the eco system. This threat

has trickled the European Union to focus on reducing the emission of the green house gases. They

have setup new innovative approach to fight against the industrial polluter and started to invest on

new technology to have low carbon economy.

Figure 1: (Laurance, 2007)

The above figure show the carbon dioxide level that rose markedly after the industrial revolution

and far more dramatically in recent decades. Shown are the annual mean concentrations (in parts

per million per volume of atmosphere).

This concept was developed based on Cap and Trade basis which was introduce by the America in

the early 1990s .This system was formed by the government of united states and was successful by

reduce air pollution by 50% caused due to the emission of Sulphur dioxide. It was achieved at much

lower cost where initially the first phase was estimated to range between US $181 and US $981 but

it got over with in US $150 (observer, 2002). This led to other project of reducing led and other

pollutants from gasoline. (Haddad, 2000). The primary target of EST is on Carbon dioxide emission,

mainly the large polluters like paper, ceramics, iron and steel factory and oil refineries and most

importantly power and heat generating industries.(Economist, 2004) . According to EU carbon

trading is trading of carbon allowance. One allowance is the rights to company to produce one tone

of carbon emission. Members of the states have accepted to allow the company to produce carbon

dioxide free of charge. Companies which produce carbon dioxide below their allocated allowance

can sell their excess allowance to company which produces carbon dioxide exceeding their

allowance. This kind of trading can support the system.

In the environmental point of view the companies are made to invest on the new eco friendly

technology to reduce their carbon emission and to restrict them with in permitted allowance for

emission. Even after if the company need extra allowance for carbon emission they to buy it at

market rate which determined by Supply and demand for carbon allowance. They had other

regulation where if the company produces more carbon dioxide excess to their allowance they were


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penalized to pay penalty. These penalties were the reason to have an idea to start the carbon

trading. Penalty of 40 Euros in 2007 for every one tone exceeding the allowance and punishment

was also there to pay penalty up to 100 Euros. Carbon trading has made the companies to find and

invest on the new eco friendly technology and use different energy source of low carbon emission.

Potter discussed that initiating an environment policy role can lead a way for new technology and

innovative ideas by the company (Taistra, 2000 cited in oberndorfer et.al.2006). He also said that if

this environmental policy is imposed on the global scale first mover countries who adopts will get

opportunity to find some new technology and export them to other nations. For example the large

companies like E.ON UK began to setup win farm which help them to use alternate energy source

and reducing the carbon dioxide emission. On this success of system it has been started to follow by

companies of other nation like Iberdrola a Spanish company, Enel from Italy, and Electricite de

France. BP being leading Oil Company has introduced new emission reduction system in accordance

with regulation policy. (Business Europe, 2005).

With the economic point of view they r broken down in to micro and macro level economic

defenders. In the micro economical level they feel that this carbon trading is very promising that

reducing the production of carbon dioxide they were able to make profit by selling their excess

allowance (Sathiendrakumar, 2003). The macro level, starting of new industry specializations helped

the growth of financial advisors and carbon trade consultants as well as the improving employability

opportunity.

Advantages of Carbon Trading

Like other business the carbon trading also has some advantages involved with them CER revenue of the country increases. They have created job opportunity for the poor people which help in decreasing the poverty. Improve the quality of our environment by making it less ordure and diseases causing

elements are reduced.

It has created awareness among the public on way to the solid waste and methods ofrecycling the waste.

Proper utilization of available resources Ground water and surface water pollution has been reduced in turn the health hazardous

problem is also reduced.

Reduction in emission of green house gases from dumping which is the major cause forglobal warming.

Project is complying with MDGConclusion

Documents

Carbon Emission Trading Final