Emission Trading-Introduction
Good afternoon everyone, today we are going to present on the topic of Emissions trading or what people always refer to as cap and trade. The purpose of this mechanism is to to make it cheaper for companies and governments to meet emissions reduction targets so as to alleviate environmental problems caused by pollution, like global warming.
Unlike traditional environmental regulations, which are based solely on the threat of penalties, emission trading is a market-based approach which attempts to provide economic incentives for achieving reductions in the emissions of pollutants.
As to how does it actually works, a central authority, usually a governmental, or intergovernmental body sets a limit or cap on the amount of a pollutant that may be emitted. The limit or cap is allocated to firms in the form of certain amount of emissions permits which represent the polluting property right. Firms that keep their emission levels below allowed level may sell their surplus permits to other firms and vice versa, if a firm wants to emit more pollutants than they are allowed, they have to buy emission permits from other firms in the market, this is the trading of permits.
There are some several important and significant examples of the application of the emission trading concept. First, It is the central element of the Kyoto protocol in the form of the Clean Development Mechanism (CDM). Second, it is the cornerstone policy of the European Union Emissions Trading System (EU ETS), which allows energy-intensive industrial plants and electricity utilities to trade allowance or permit to emit CO2. A final example, it was also used in the United State’s Clear Air Act in 1990 in order to reduce SO2 emission.
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[You can add in your data of how many gases are traded and their values/ other things you think is important here. ]