There is ever increasing scientific evidence, for the effects of global warming. The effects can be observed by our planet’s changes in global temperatures, rising sea levels and more examples than ever before of extreme weather. This means that the greenhouse gasses on the planet are in need of stabilisation. The 21st Century has seen the rise of the carbon trading market, as a means of dealing with these important issues.
The trading of the right to produce carbon emissions or greenhouse gases to the same value has become a popular form of emissions trading. This is part of the futures market. Total carbon emissions emitted by each company, are now measured in tons of CO2. This is the company’s carbon footprint.
In 1997, the Koyoto protocol produced a strategy, which each participating country must adhere to in order to reduce harmful carbon emissions. Under the Koyoto agreement, 37 countries have agreed to reduce the production of carbon dioxide and other harmful greenhouse gases. Countries bound by this agreement, can now place emissions restrictions on businesses and companies within their boundaries, in order to achieve the objectives outlined in this agreement.
The original objective of the Koyoto agreement was to lower greenhouse gas production by 5.2% of the amount produced in 1990 by 2012. In order to achieve this, the right to emit greenhouse gases has been limited by the introduction of a cap. The emissions cap signifies how many tons of greenhouse gas emissions a company can produce.
The EU has created a scheme, whereby the right to produce such emissions can be traded. Brokers can facilitate the trading of carbon credits. Individual investors and companies must first establish a trading account, which must be funded by a minimum amount, specified by the broker. This method of trading has become extremely popular as you do not need to be an expert to get involved, just an initial cash injection.
The Carbon trading market enables the trading of carbon credits. Each credit represents the right to emit 1 ton of carbon dioxide or greenhouse gas to the same value. This enables more environmentally viable companies to trade existing credits to companies who wish to buy carbon credits, to offset their carbon footprint. Those who exceed the agreed safe limits therefore need to pay more ecologically friendly businesses for the credits they have no use of.
Carbon trading has become the popular way of lowering greenhouse gas emissions, in countries who signed the Koyoto agreement. This form of trading however has also become popular in countries not yet bound by the agreement’s terms.
Individual investors have an interest in the market, motivated by personal gain. The International carbon trading market, despite the global depression, has grown by 5% since 2009. The average value of an individual carbon credit rose by 17% last year.
The EU has proposed to do more to tackle the problem of greenhouse gas emissions, by introducing changes to the current EU emissions trading scheme. The changes are set to target emissions produced by air travel leaving and returning to the EU. Further Nations propose to become part of carbon trading schemes next year.
Carbon Expert provides access for our clients to the carbon credit trading market in an innovative and forward thinking way, offering OTC trading of VERs via its network of professional carbon brokers.
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