Emissions Trading: Difference between revisions

The birth of the idea of carbon credit currency came with the Kyoto Protocol. One target goal was the “stabilization of greenhouse gas concentration in the atmosphere at a love that would prevent dangerous anthropogenic interference with the climate system”. <ref> <br> Singhal, Neeraj and Gupta, Himani. 2011. </br> Carbon Credit Currency for the Future. [book auth.] Walter Leal Filho. The Economic, Social and Political Elements of Climate Change. Berlin, Heidelberg : Springer-Verlag, 2011, p. 208 </ref>

One result of this was the “legally binding commitment for the reductions of four greenhouse gases” <ref> <br> Singhal, Neeraj and Gupta, Himani. 2011. </br> Carbon Credit Currency for the Future. [book auth.] Walter Leal Filho. The Economic, Social and Political Elements of Climate Change. Berlin, Heidelberg : Springer-Verlag, 2011, p. 209 </ref> for all member countries.

Another point important point which has been regulated in Kyoto was mechanisms like “Emissions Trading, the Clean Development Mechanism and Joint Implementation” <ref> <br> Singhal, Neeraj and Gupta, Himani. 2011. </br> Carbon Credit Currency for the Future. [book auth.] Walter Leal Filho. The Economic, Social and Political Elements of Climate Change. Berlin, Heidelberg : Springer-Verlag, 2011, p. 209 </ref>

The basic principle of carbon markets is that companies have a limited right to emit greenhouse gases in the atmosphere. The company can use these rights to emit itself or they sell their right and another company which has not enough emissions rights. At the consequence companies which have a very clean production can make additional money with their emissions right.

In the literature have carbon market the following definition:

„Carbon markets are primarily aimed at dealing with the problem of increasing concentrations of greenhouse gases in the atmosphere due to human activities. Carbon markets can also be attributed to technological and industry development, as well as a new area for employment growth.“ <ref> <br> Singhal, Neeraj and Gupta, Himani. 2011. </br> Carbon Credit Currency for the Future. [book auth.] Walter Leal Filho. The Economic, Social and Political Elements of Climate Change. Berlin, Heidelberg : Springer-Verlag, 2011, p. 209 </ref>  

„The carbon market was valued at $1 billion in 2004 and reached $11 billion during 2005, with $8 billion from EUETS and $3 billion from primary CDM projects. The market reached $31 billion in 2006 and $64 billion in 2007, with $50 billion from EUETS, $7 billion from the primary CDM market, $5 billion from the secondary CDM market, and $2 billion from other markets. The market reached $120 billion in 2008, which is 120 times more than the 2004 figure of $1 billion.“ <ref> <br> Singhal, Neeraj and Gupta, Himani. 2011. </br> Carbon Credit Currency for the Future. [book auth.] Walter Leal Filho. The Economic, Social and Political Elements of Climate Change. Berlin, Heidelberg : Springer-Verlag, 2011, p. 209 </ref>

To see some details about the basics of this market I will provide the following paragraph about the possibilities of Carbon credits and the emissions trading scheme.

„Carbon credits are a key component of national and international emissions trading schemes. They provide a way to reduce greenhouse effect emissions on an industrial scale by capping total annual emissions and letting the market assign a monetary value to any shortfall through trading. Credits can be exchanged between businesses or bought and sold in international markets at the prevailing market price. Credits can be used to finance carbon reduction schemes between trading partners and around the world.“ <ref> <br> Singhal, Neeraj and Gupta, Himani. 2011. </br> Carbon Credit Currency for the Future. [book auth.] Walter Leal Filho. The Economic, Social and Political Elements of Climate Change. Berlin, Heidelberg : Springer-Verlag, 2011, p. 210 </ref>

„Operators of large energy production plants or energy-intensive industrial companies are assigned a predetermined number of emissions certificates by their governments. These initial certificates are free, and authorize the companies to emit a specific amount of CO2. If a company exceeds its allowance it must buy in additional certificates. When a company reduces its emissions, it can sell its excess certificates for profit. Companies face penalties when they do not acquire enough certificates to balance out the CO2 they have emitted.“ <ref> <br> Singhal, Neeraj and Gupta, Himani. 2011. </br> Carbon Credit Currency for the Future. [book auth.] Walter Leal Filho. The Economic, Social and Political Elements of Climate Change. Berlin, Heidelberg : Springer-Verlag, 2011, p. 210 </ref>

„Carbon credits are a key component of national and international emissions trading schemes. They provide a way to reduce greenhouse effect emissions on an industrial scale by capping total annual emissions and letting the market assign a monetary value to any shortfall through trading.“ <ref> <br> Singhal, Neeraj and Gupta, Himani. 2011. </br> Carbon Credit Currency for the Future. [book auth.] Walter Leal Filho. The Economic, Social and Political Elements of Climate Change. Berlin, Heidelberg : Springer-Verlag, 2011, p. 210 </ref>

So it’s a key business for companies to reduce their greenhouse gas emissions and to sell their carbon credits to other companies witch need carbon credits because of their high polluting production or realized production extensions.

„Emissions trading (ET), as set out in Article 17 of the Kyoto Protocol, allows countries that have emission units to spare – emissions permitted them but not “used” – to sell this excess capacity to countries that are over their targets. It is an administrative approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants. It is sometimes called “cap and trade”. A central authority (usually a government or international body) sets a limit or cap on the amount of a pollutant that can be emitted.“ <ref> <br> Singhal, Neeraj and Gupta, Himani. 2011. </br> Carbon Credit Currency for the Future. [book auth.] Walter Leal Filho. The Economic, Social and Political Elements of Climate Change. Berlin, Heidelberg : Springer-Verlag, 2011, p. 212 </ref>

„The European Union Greenhouse Gas Emission Trading System (EU ETS) is the major market for greenhouse gas (GHG) emission allowances, and is the engine, perhaps even the laboratory, of the global carbon market. Its major achievement is that it helps discover the price of emitting GHGs in Europe. Several exchanges transparently disclose prices at which allowances change hands: for example, the EU emission allowance (EUA) for December 2008 delivery has traded in the €20–25 price band since May 2007.“ <ref> <br> Singhal, Neeraj and Gupta, Himani. 2011. </br> Carbon Credit Currency for the Future. [book auth.] Walter Leal Filho. The Economic, Social and Political Elements of Climate Change. Berlin, Heidelberg : Springer-Verlag, 2011, p. 213 </ref>  

„The European emission trading market rise in terms of value during 2008 reached US$94,971.7 million; the 2007 figure was US$50,097 million.“ <ref> <br> Singhal, Neeraj and Gupta, Himani. 2011. </br> Carbon Credit Currency for the Future. [book auth.] Walter Leal Filho. The Economic, Social and Political Elements of Climate Change. Berlin, Heidelberg : Springer-Verlag, 2011, p. 213 </ref>

===Are too many emission allowances in the market?===

http://www.cdm-watch.org/