What Are Carbon Credits and How Does the Carbon Market Work?
The carbon market is a concept based on polluter pays and cap and trade principle. The objective is to reduce gas emissions through the use of market law. It assembles voluntary organizations that exchange the rights to issue carbon dioxide. When the companies are listed, the administration decides on the total amount of gas emissions they can emit as a group. Normally the total amount is lower than the one emitted the previous year. The main idea here is to reduce this level every year. After the central administration decides on the total amount, a specific amount of gas emissions is distributed to each company. During the year, if a company manages to emit less than the allowable amount, it can sell the remainder to another company. This transaction doesnt change the total emissions of the group. Therefore, one company must emit a lower-than-allowable amount in order for another company to emit more.
