General background – Carbon trading Central to the Stern Review is the recommendation to set up and exploit Carbon trading. Carbon trading is based on the idea that if a price is set on emissions then they can be traded in the marketplace like any commodity within a framework in which nations or individual producers must meet restrictions on the emissions. Within a nation the total emissions is fixed e.g for particular period and thus the individual contributors to this total can each be given an allowance or allocation. Many countries are now embarked on emissions trading schemes including the USA which will see its Regional Greenhouse Gas initiative COMMENCE IN Jan 2009. Trading in essentially what are pollutants is not new. Acid rain and smog prompted similar schemes to limit emissions of sulphur and nitrogen oxides in the 1990’s. Trading scenarios:
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Appraisal
of Years 1-4 of the UK Emissions Trading Scheme (PDF) |
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