What Is Emissions Trading

That's what emissions trading is all about. If a corporation falls below the maximum GHG Emissions allowed, then the company can bank those unused amounts as credits. And for those credits-that came about because the corporation was able to reduce emissions-it is able to give those credits to another source of emissions, which is then allowed to produce more.

Emissions trading is one of those things that cropped up because people-especially people involved in the production of goods and services-are natural bargainers. Someone managing a corporation realizes that he will have a difficult time reducing ghg emissions on one particular factory, maybe because that factory is old or simply has to produce a lot more. At the same time, he knows he can reduce emissions significantly on another factory that is newer and is required to produce a lot less. So he reasons that it doesn't really matter if the limit is five units per factory as long as both factories produce no more than 10 units of emissions. So if he can get one factory down to two units, the other can produce eight and still keep the pair of them under regulations.

Of course, that is a simplified explanation of emissions trading, but that's how it works in a nutshell. It would be better, of course, if it we could somehow convince all factories to reduce emissions to the very minimum amount we can possibly have and still produce goods, but there are so many variables it simply isn't possible without closing down a lot of plants. And so allowing them to bargain with their GHG Emissions allowances is one way of softening the blow of the restrictions in the first place. It allows them to find a way to comply, and that is something.

As far as long term solutions are concerned, emissions trading probably isn't the answer that we're looking for. As long as GHG Emissions numbers stay high, then the effect is the same. It doesn't really matter who is producing them. The process of emissions trading was meant to stop the growth of GHG Emissions while giving some of the larger producers time to find ways to cut back their production. Eventually, all companies will have to be held accountable for the gases that they are releasing into the atmosphere and the numbers must come down. It will most likely be legislation that causes this to happen since the corporations have already shown a resistance to making these changes on their own.