What is the emissions trading?

In Europe, North America, Australia and New Zealand, national and regional emissions trading systems have been introduced to regulate industries that are particularly energy-intensive and emissions-intensive through a market mechanism. Emissions trading employs a marketplace to reduce emissions of harmful gases, which creates motivation for investing in climate-friendly technologies.

There is a “mandatory market” and a “voluntary market”.

On the “mandatory market”, businesses that are required to take part in emissions trading are issued a set amount of emissions certificates each year by their respective countries. This amount is smaller than the amount of emissions that a business creates. Businesses have to achieve the rest of the emissions reductions through reduction measures or else buy emissions certificates from businesses that do not need them because they have carried out a greater amount of reduction measures. The intention is to create an impetus to engage in reduction measures by setting a high market price for tradable emissions certificates.

The “voluntary market” makes it possible for responsible businesses, organisations and individuals to offset emissions without government regulations.

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