Carbon Trading
- Carbon (or emissions) trading is one way governments, industries and businesses worldwide are moving to reduce their greenhouse gas (GHG) emissions. The sector was valued at about $10 billion in 2005, which increased to $30 billion in 2006, with rapid growth expected to continue in the future.
- British Columbia is working with other jurisdictions that are members of the Western Climate Initiative (WCI) to develop a regional 'cap and trade' system that will help reduce emissions in B.C. and ensure the province is competitive in this new carbon trading marketplace.
- A cap and trade system uses the market principles of supply and demand to reduce GHG emissions.
- The system works by setting an overall cap on the total amount of emissions that are allowed, and then lowering the cap over time in order to reduce overall emissions.
- GHG emitters that are required to participate in the system are issued emission allowances (called credits) that add up across the province to the total amount of emissions allowed under the cap.
- GHG emitters that can reduce their emissions most quickly and efficiently will be able to sell the GHG emissions permits they no longer need to other GHG emitters that are producing more emissions than they have permits.
- In this way, the cap and trade system uses the marketplace to reward efficiency and innovation. Those that are most efficient will profit from reducing their GHG emissions. Those that are less efficient or are growing rapidly will need to pay to purchase additional permits to cover their GHG emissions.
- GHG emissions trading systems have already been successfully set up in the United States, Europe and New Zealand.
