“Global Carbon Emissions Trading, a Good Idea?”

“Global Carbon Emissions Trading, A Good Idea?”

Since 1992, carbon trading has become a major focus of many countries’ climate policy, with many critics arguing about the validity of carbon trading fulfilling its goals of functioning as a market or cutting down on emissions. Carbon trading works on a cap- and- trade basis with the government issuing permits to emit carbon or other polluting substances which are carbon equivalents. When a company or any other entity, such as manufacturing facilities, wants to emit more than its allocated amount, it must purchase a permit from other market participants. This should serve as an incentive to other market participants to produce less carbon, since they can sell the extra permits they have for cash.

Parshley (2008) explains that emissions’ trading is a result of the Kyoto Treaty which limited the amount of greenhouse gas to be released into the environment on an international basis. The theory behind the treaty was to reduce the amount of emissions and in time the amount of greenhouse gas would be reduced. As a result of the limitation, a market was created where countries producing more emissions than they were allocated could then purchase credits from countries that were producing less emissions to allow for the overproduction. This has created a growing debate with regard to the effectiveness of the treaty. It is difficult to measure the amount of emissions produced by each nation and with the ability to trade for additional credits, there is little accountability or reason for the countries to work toward a solution to reduce emissions.

As a result of the cap on carbon trading, in theory, one would think it would reduce the amount of emissions created every year, due to emissions being down and the cost of permits going up, but the theory has yet to be proven. According to an article written by Webber (2012), Financial News, “While the Kyoto Protocol made carbon trading a central pillar of global...