In the carbon market, you can purchase one offset for permission to emit one ton of carbon dioxide. The carbon market is a product of the Kyoto Protocol of 2005, which allows a set limit of carbon emissions to countries using market forces to determine which countries are allowed to emit more than others. There are, of course, problems with this arrangement, as these numbers are more or less fixed and do not account for growth and increased demand over time. This policy also poses a disadvantage to countries with smaller allowances, as it limits their ability to grow and compete with the international market. The law was created in hopes of limiting and eventually reducing CO2 emissions, but many people complain that it does not satisfy our immediate needs as consumers, for lack of widespread alternatives for energy consumption.
There is actually a farmer’s market in the Philippines named the Carbon Market, but this is probably not what you are wondering about. What you are referring to is what is commonly known as emissions trading, or cap and trade. The goal of such a system is to control pollution by creating an economic incentive for companies to reduce their emissions. The way this is accomplished is fairly simple.
A central authority sets a cap or limit on the ammount of a pollutant companies are allowed to emit. If a company grows and needs to raise their limit of emissions, they must buy credits from a company who has been able to cut their emissions. This way, it is economically beneficial for companies to reduce their emissions, so they have this left over emission allowance to sell off.
Hope this helps!
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