Wednesday, January 16, 2008

carbon trading

I had heard this term.. of course without knowing the meaning.. During "Applied Economics" (!!) lecture, Sir explained it.. As follows:

Lets assume for a certain area, air pollution restrictions are laid.. in a sense.. no factory should emit (say) 100 units of carbon (carbon- in a sense, pollution causing element). Lets say in that area, there are 2 companies A and B.. A's factory is controlling its emission to say 80 units of carbon.. Then they are given a sort of "carbon saver" certificate, indication of "they are carbon savers" That certificate is considered of having a value. Because, if suppose company B's factory is not able to control their emission to 100, say they emit 120 amount of carbon.. they can acquire (may be, actually BUY) this "carbon saver" certificate from company A!! sort of license.. to emit higher amount of carbon.. So that total level of carbon in that area is kept constant (120 + 80) as well as because company A has saved carbon, they are given reward while company B which could not save carbon, is - in a sense - penalized.

Cool information.. isn't it?

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