Opportunity, Challenge and Achievements of Global Carbon Trading: Review Paper

Abstract

The world climate has been highly affected impacting people in different ways due to the release of CO₂ to the atmosphere. This concern has led to the 1997 international agreement in Kyoto (the so-called Kyoto Protocol), whereby most countries are committed to reducing their GHG emissions by an average of 5.2% below 1990 levels in the period 2008 to 2012 from the atmosphere. To meet the binding emissions reductions agreed under the Kyoto Protocol, a number of nation states have turned to a market-based policy approach of an emissions trading mechanism. Carbon trading is a market mechanism allowing those most efficient at reducing emissions to do so and trade their “carbon credits” with those who cannot reduce emissions as cost effective. There have been a number of opportunities both from side; availability of compliance and voluntary markets and, available potential from host countries. Opportunities like special climate change fund, least-developed countries fund and Kyoto protocol adaptation fund are some of the opportunities available from the donor side. There are many challenges to accessing carbon finance—the creation and sale of carbon credits. Some of them are additionality, leakage, measurement, forward crediting, land tenure and permanence. Aside from its obvious advantages for the atmosphere and forests, using carbon trading potentially provide substantial economic benefits for developing nations. Overcoming the existing problems might helps to attain the objectives.

Keywords: Carbon trading, Green house effect, voluntary carbon market, compliance carbon market