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The Advantages of Carbon Trading

Carbon trading is a system in which companies that produce carbon emissions first purchase credits allowing them to emit a specified amount of carbon into the atmosphere. Companies that pollute more need to buy more credits; companies that find ways to avoid emitting carbon can sell their unused credits.

  1. Equity

    • One of the biggest advantages of a carbon trading program is equity, with every company that produces carbon emissions forced to buy credits in the same national or global marketplace. This means that the price of carbon credits is determined by supply and demand rather than an arbitrary government-set price.

    Incentive

    • The prospect of selling unused carbon credits, along with a reduced need to buy credits in the first place, can give companies an incentive to modernize and find new methods of manufacturing that produce fewer carbon emissions. As the cost of carbon credits rises, this incentive increases. However, it will always be in a company's best financial interest to produce as little carbon as possible.

    Flexibility

    • A carbon trading program is also flexible, giving businesses a chance to adapt at their own rate. Smaller companies that can invest in new technology may be able to do away with the need for carbon immediately, while larger industries can continue to purchase credits until they are fully modernized and producing as little carbon as possible.

    Control

    • Carbon trading also gives a government long-term control of the carbon emitted by its industries. As the government sets deadlines for reducing the number of carbon credits available, companies can anticipate a rise in the price of remaining credits. This allows the government to cut down on carbon emissions nationwide by continually reducing the number of available carbon credits.

    Environmental Benefits

    • All of the advantages of a carbon trading system result in an environmental benefit. By reducing carbon emissions, a carbon trading program lessens the strain on the atmosphere and the pressure on plant life to filter the air. Less carbon in the air also reduces the greenhouse effect and potential effects of global warming, preventing or lessening any harmful effects of climate change.

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