What is the definition of carbon trading?
Carbon trading is an incentive system that rewards or penalizes companies financially, depending on the amount of carbon emissions each year. Companies that emit more than an established cap must buy carbon credits from companies that stay under the limit.HistoryCarbon trading was proposed to the world in 1997 at a United Nations meeting held in Kyoto, Japan. The criteria to reduce carbon emissions around the world spelled out at this meeting is called the Kyoto protocol. It was ratified by more than 160 nations in February 2005.FunctionThe function of carbon trading is to reduce the overall amount of carbon emissions. Each company is given a certain amount of carbon credits. If the company pollutes over a set limit, it must pay other companies that stayed under the limit by buying their excess credits.IdentificationA carbon credit is equivalent to one metric ton of carbon dioxide.ConsiderationsThe Guardian revealed in a December 2009 article that European taxpayers have lost 5 billion
