Emissions trading is a key instrument in the drive to reduce greenhouse gas emissions. The underlying principle is to ensure that the emissions are reduced where the cost of the reduction is lowest, thus lowering the overall costs of combating climate change.
What is emissions trading?
It allows an organisation to decide how and where they will reduce emissions by trading their emissions allowances. This ensures emissions are reduced where the cost of the reduction is lowest. The cost of emissions allowances is determined by the carbon market, and by the demand for, or availability of, allowances.
It is particularly suited to greenhouse gases, as these have the same effect wherever they are emitted. It means we can provide certainty about the amount of emissions by setting an overall cap, and without adding to the regulatory burden, and it encourages investment in low carbon technologies.
The EU Emissions Trading System (EU ETS) is the world’s first functioning emissions trading system.
20 July 2009: Global Carbon Trading report published
A report commissioned by the Prime Minister, Gordon Brown, concludes that a global carbon trading network is vital to preventing dangerous climate change:
A series of supporting documents is available along with the main report: