• International Insurance Blog

  • Saturday, November 18, 2017

Because of the necessity to protect the environment and operate strategically, businesses have perceived that conserving resources can create new opportunities to improve performance and generate profits, as well as strengthening a company’s reputation. As such, initiatives that reward companies or even agribusinesses that promote environmental conservation can be seen as effective incentives.

Carbon Trading is a market based mechanism for helping mitigate the increase of carbon dioxide in the atmosphere. Carbon trading markets are developed to bring buyers and sellers of carbon credits together with standardized rules of trade. Entities that manage forest or agricultural land might sell carbon credits based on the accumulation of carbon in their forest trees or agricultural soils.  Similarly, business entities that reduce their carbon emission may be able to sell their reductions to other emitters. It is one of the ways countries can meet their obligations under the Kyoto Protocol to reduce carbon emissions and thereby mitigate global warming.

There are two ways to control pollution– one way is to stop the flow from its source, the other is to clean up the mess at the other end. Carbon trading is a fine example of the latter approach, with the attempt to stop the flow of carbon pollution at its source all but abandoned. This approach, however, cannot work simply because the world is not a big enough sponge to soak up the billions of tons of carbon dioxide that the industrialized countries emit every year, and there is no technology that can “scrub away” carbon from the air.  The earth’s above-ground carbon-cycling capacity is limited, and cannot be endlessly extended to mop up the continued flow of fossil carbon into the atmosphere.

Carbon emissions trading have been steadily increasing in recent years. According to the World Bank’s Carbon Finance Unit, 374 million metric tonnes of carbon dioxide equivalent were exchanged through projects in 2005, a 240% increase relative to 2004 (110mt) which was itself a 41% increase relative to 2003 (78mt).

Comment by Blog Contributor on 2009 08 16

With the development of a market for mandatory CO2 trading in the Kyoto Protocol, certainly, the London financial market has established itself as a center of the carbon trading market, and is predicted to have developed into a market valued at billions.

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