Emissions trading, is, a unique trading system. It is a very powerful policy that helps in managing emissions from industrial greenhouse gas. The presence of the system is very important because it allows for operational excellence. It also provides a highly functional incentive and an efficient path for technology development.
Emissions trading has, been used for development of existing and new technologies. It is a policy instrument that is highly preferable to taxes, taxpayer funded support, inflexible command and different control regulations systems. This is because
- It is designed to deliver different environmental objectives
- It is economically efficient and a reliable means of reaching set target for greenhouse gas reduction
- Emissions trading also deliver a very clear price signal
Governments use emissions trading policy system among other policies. This is because the trading often responds to central objective of climate change. It is essential to note that different countries across the globe have been implementing policies that help to fight environmental pollution. Emissions’ trading therefore is, directed to different markets to help create a low to zero carbon emission environment.
To achieve this goal, an emissions market requires
Scarcity of emission allowances to create a stable price signal for governments and businesses alike
- Long term predictability and clarity of targets, rules as well regulatory systems that guide emission markets worldwide
- Cost containment provisions that help to allow for efficiency in generating solutions for different problems. The solutions however have to be low cost to suit developed and developing countries.
- Additionally, emissions trading markets should grow and mature over time. This helps to provide a functional and wide GHG coverage in
- Geography by geography and
- Sector by sector
With these goals, it will be easy to achieve a global price for trading system and a stable price for carbon. This is based on the fact that the trading system will in the long run exist in currency, debt markets and commodity. It will also ensure that carbon has the right mechanism and proper links to different emissions markets. However, the markets will also require
- The best regulations and structures to link different trading systems and approaches, by market instruments or exchange rates
- The markets will also require the right benchmarks, rules, ambitions and enforcement within different approaches
- They will also require worldwide mechanisms on verifiable emissions reduction programs and projects
Emissions trading now and in the future
Research shows that reaching a common global carbon price helps to create a new commodity. It also helps in creation of new financial and investment opportunities. The opportunities will in turn help to link different methods of greenhouse gas emissions/abatement and the metrics with large capital markets.
The strategy will help to finance projects that will see to the success of low to zero carbon investment projects across the globe. What’s more, emissions trading, is, a very crucial and central Kyoto protocol element. It is the cornerstone policy of European Union in the fight against environmental pollution.
Other countries including South Korea and China are also set to adopt emissions trading as part of their carbon reduction projects.
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