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Carbon Trading

a1sx2_Thumbnail_Carbon-Credits.jpgThe Kyoto Protocol introduced many initiatives to reduce CO2 emissions, one was Carbon Trading; however carbon credit prices have fallen by 50% since June 2011.

The idea behind Carbon Trading was that a limit would be established to emit greenhouse gases from high emissions. Once the limit was established then polluters would either have to buy the right to pollute or stop polluting or a combination of the two. Paying to pollute would involve purchasing carbon credits.

The emission trading scheme in the EU works by polluters being given permits from free for each trading period. The current period started in 2007 and is due to end in 2012 Additional permits have to be purchased on the secondary trading scheme. Recently the price of carbon permits fell to a low of euro 12 per tonne, having fallen from 30 euros in June 2011. As the global slowdown has continued owners have cut back production and therefore effectively polluted less so have carbon credits that aren’t required. These permits can be sold off on the secondary market and some companies have been doing this to raise revenue. With the price of polluting low then many companies have deferred investing in energy efficiency schemes.

The current UN Climate Change convention in Durban will seek to tighten the ideology behind the scheme that large scale polluters reduce pollution by improving technology and efficiency rather than a slowing market.

Note: The EU has committed to a 20% reduction in CO2 emissions by 2020 however the US, a big polluter, opted out of the Kyoto Protocol.

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