emissions trading

[swatiraohnlu]

Emissions trading (or emission trading) 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. In an emissions trading system, a central authority (usually a government or international body) sets a limit or cap on the amount of a pollutant that can be emitted. Companies or other groups are issued emission permits and are required to hold an equivalent number of allowances (or credits) which represent the right to emit a specific amount. The total amount of allowances and credits cannot exceed the cap, limiting total emissions to that level. Companies that need to increase their emissions must buy credits from those who pollute less. The transfer of allowances is referred to as a trade.

Should government adopt emissions trading to combat global warming? Pros and cons?

 

[dimpy.handa]

Over 30 countries have agreed to reduce annual greenhouse gas emissions by an average of 7%. These countries (so called Annex countries) can trade ERC's with each other to level out the cost of achieving emission reductions. For example, a country where there is plenty wind can put up turbines, generate large amounts of emissions free energy and sell the reduction credits to a country where there is less wind and possibly higher costs to achieve reductions with similar turbines.

Each country reports yearly to the IPCC its total emissions and emission reductions. If they are on track with their reductions, they maintain trading privileges. If not, penalties or sanctions may be imposed.