Greenhouse Gases Emissions Trading is emerging as a key instrument in the drive to reduce greenhouse gas emissions. The rationale behind emission trading is to ensure that the emission reductions take place where the cost of the reduction is lowest thus lowering the overall costs of combating climate change.
Emissions trading is particularly suited to the emissions of greenhouse gases, the gases responsible for global warming, which have the same effect wherever they are emitted. This allows the Government to regulate the amount of emissions produced in aggregate by setting the overall cap for the scheme but gives companies the flexibility of determining how and where the emissions reductions will be achieved. By allowing participants the flexibility to trade allowances the overall emissions reductions are achieved in the most cost-effective way possible.
Participating companies are allocated allowances, each allowance representing a ton of the relevant emission, in this case carbon dioxide equivalent. Emissions trading allows companies to emit in excess of their allocation of allowances by purchasing allowances from the market. Similarly, a company that emits less than its allocation of allowances can sell its surplus allowances. In contrast to regulation which imposes emission limit values on particular facilities, emissions trading gives companies the flexibility to meet emission reduction targets according to their own strategy; for example by reducing emissions on site or by buying allowances from other companies who have excess allowances. The environmental outcome is not affected because the amount of allowances allocated is fixed.
The case for a tradable entitlements system is based on the advantages that it would offer over other politically feasible alternatives. In the short term, it offers the possibility of reaching the environmental goals at a lower cost than would be possible if each country were limited to reduction options within its own borders. Making it easier to reach the goals may encourage more countries to sign the Protocol and would probably increase compliance with those goals. Because it separates the issue of who pays for control from who implements control, it facilitates trans-boundary cost- sharing, an item of particular importance to both the developing countries and the transition economies of Eastern Europe.
This 150+-page report on GHG Emissions Credit Trading covers all the practical details of emission trading. Covering the basics of the industry to understanding the industry in-depth, the report looks at monitoring issues, issues with the Kyoto Protocol, the various emission-trading projects, and much more. It is a complete guide to GHG Emissions Credit Trading.
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