carbon trading, definition of

Carbon Trading

A carbon credit is a market-driven way of reducing the impact of greenhouse gas emissions; it allows an agent to benefit financially from an emission reduction. There are two forms of carbon credit, those that are part of national and international trade and those that are purchased by individuals.


Carbon Credits have a rather mixed history, as given the nature of the 'arms length' relationship between the producer of the carbon credit and the consumer of the credit; it's often difficult to ensure a consistent 'carbon value' to a given credit as there is no globally unified method of certification and validation of what exactly is a carbon credit. Further political interference in the market to encourage take up of carbon reducing technologies (like Solar Panels) can devalue credits in market - making it less attractive to trade with. Also carbon credits can be held 'off market' so artificially controlling supply. 

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