Carbon Trading, definition of
- Carbon Trading
The sale and purchase of carbon credits or pollution permits through carbon
markets.
The practice is designed to help control carbon dioxide emissions by placing
a price on a ton of emitted CO2 and providing members of trading schemes with
economic incentives to reduce the amount of pollution they produce.
The market is dominated by cap-and-trade schemes, such as the EU's emissions
trading scheme, but carbon trading can also refer to the sale of carbon offsets
from emission reduction projects.
In theory, carbon trading mechanisms mean that emission reductions are
achieved at the lowest possible cost, as businesses will only purchase carbon
credits - effectively paying someone else to cut emissions for them - if they
can not deliver emission reductions at a lower cost themselves.
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