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Carbon Trade

Carbon pricing initiatives impose costs on greenhouse gas emissions to incentivize reductions, with mechanisms like emission trading schemes and carbon taxes being key tools. Emission trading allows companies to buy and sell pollution allowances, while carbon taxes directly charge for emissions, both aiming to lower greenhouse gas output. The effectiveness of these strategies, including carbon trading, is debated, but they are seen as essential for meeting climate goals and enhancing corporate responsibility towards emissions.

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Carbon Trade

Carbon pricing initiatives impose costs on greenhouse gas emissions to incentivize reductions, with mechanisms like emission trading schemes and carbon taxes being key tools. Emission trading allows companies to buy and sell pollution allowances, while carbon taxes directly charge for emissions, both aiming to lower greenhouse gas output. The effectiveness of these strategies, including carbon trading, is debated, but they are seen as essential for meeting climate goals and enhancing corporate responsibility towards emissions.

Uploaded by

anoldtoothbrush
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Carbon Price

Carbon pricing initiatives apply a cost to greenhouse gases emitted into


the atmosphere, providing an economic incentive for those emissions to
be reduced or avoided .They can also involve a cap on the total emissions
permitted or be applied voluntarily by businesses operating outside of a
capped sector.

• . • Carbon pricing assigns a cost to the right to emit carbon and


encourages actors to respond to the risks of climate change.
• Carbon pricing initiatives are favoured as a cost-effective policy
tool for their ability to lower the costs of reducing carbon
emissions, through decentralising decisions on where it is most
efficient to reduce emissions from government to business and
stimulating innovation by providing an on-going incentive to cut
carbon
• Such factors which increase confidence amongst both government
and business that lower-cost reductions are accessible, can in turn
be a powerful lever to greatly increase ambition to tackle climate
change Indeed, recent analysis suggests that with international
carbon pricing and trading, it is possible to nearly double the
climate ambition at the same overall cost as countries’ complying
with their Paris Agreement targets.
• Internal carbon prices are being factored into business planning
by over 1,400 companies worldwide.

Emission Trading Scheme


Who applies it- National or sub-national government

What is it- Direct caps on carbon emissions from one or more sectors. Capped
companies can buy and sell pollution allowances, which must be surrendered to
match emissions produced

Role of offsets- Can be limited by the percentage of emissions allowed, type,


when created and location

Who sets the price- Market-based, Can include price floors and/or caps

Where does the money go- Government decides on use of allowances


revenues

How does it reduce GHG’s- Direct—emissions are capped, with the


cap decreasing over time
• Indirect—cost incentive to lower emissions
• Indirect—subject to use of revenue from allowances sold by government
• Direct—via offset use

Carbon Tax
Who applies it- National or sub-national government

What is it- A fixed tax applied upon emitting a specified volume of greenhouse
gases

Role of offsets- Can be limited by the percentage of emissions allowed, type,


when created and location

Who sets the price- Government sets the tax, market sets offset price

Where does the money go- Government decides on use of tax revenues

How does it reduce GHG’s- Direct—

• Indirect—cost incentive to reduce emissions


• Indirect—subject to use of tax revenue by government

Carbon Tax
 A carbon tax is a fee imposed on businesses and individuals that
works as a sort of "pollution tax."
 The tax is a fee imposed on companies that burn carbon-based
fuels, including coal, oil, gasoline, and natural gas.
 The burning of these fuels produces greenhouse gases, such as
carbon dioxide and methane, which heat up the atmosphere and
cause global warming.
 A carbon tax is seen as reducing emissions by making it more
expensive to use carbon-based fuels, therefore giving companies a
reason to become more energy-efficient, so as to save money.
 A carbon tax would also increase the costs of gasoline and
electricity, therefore giving consumers a reason to switch to clean
energy.

Cap and Trade


 Cap-and-trade energy programs are intended to gradually reduce pollution by
giving companies an incentive to invest in clean alternatives.

 The government issues a set amount of permits to companies that comprise


a cap on allowed carbon dioxide emissions.
 Companies that surpass the cap are taxed, while companies that cut their
emissions may sell or trade unused credits.
 The total limit (or cap) on pollution credits declines over time, giving
corporations an incentive to find cheaper alternatives.
 Critics say that caps could be set too high and give companies an excuse to
avoid investing in cleaner alternatives for too long.

Carbon Trading
 Carbon trading is also referred to as carbon emissions trading.

 Carbon trade agreements allow for the sale of carbon credits in


order to reduce total emissions.
 Several countries and territories have started carbon trading
programs.
 Carbon trading is adapted from cap and trade, a regulatory approach
that successfully reduced sulphur pollution in the 1990s.
 These measures are aimed at reducing the effects of global warming
but their effectiveness remains a matter of debate.
 Rules for a global carbon market were established at the Glasgow
COP26 climate change conference in November 2021, enacting an
agreement first laid out at the 2015 Paris Climate Agreement.

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