How Blockchain Technology Helps Carbon Trading?

The crypto industry is focusing hard on transforming the global business to be more eco-friendly. "Carbon Trading" is one of those steps to make each and every business operation more eco-friendly.

What is Carbon Trading?

Carbon Trading is a mechanism adopted for promoting the reduction of emission of Carbon-dioxide, the global greenhouse gas.

This crypto trading system is the result of the UN Government in Kyoto, Japan's work to solve the greenhouse gas emission reduction problem in December 1997.

Carbon Trading is a market-based system that aims to reduce greenhouse gases that contribute to global warming. Thus it is the process of buying & selling permits & credits which allows permit holders for the emission of carbon dioxide.

The European Union Emission Trading System (EU ETS) is the world's biggest carbon trading system. It is the pillar of the EU's efforts to slow climate change.

How Does Carbon Trading Work?

For the development of carbon-lowering schemes in many poorer nations, there have been many attempts by allowing richer countries to cut off their carbon emission. 

The effectiveness of this scheme will be questioned with research which indicates some countries have created more emissions which they have curtailed.

The government issues permit up to the agreed limits which are given as free or auctioned to the companies. This is called a cap & trade scheme at regional, national, and international levels. This works via setting a limit or cap on the number of emissions that are allowed from a significant carbon source, which involves the power industry, air travel, automotive and more.

If any company curbs its carbon, then it can trade its excess permits on the carbon market for cash. On the other hand, if the company is unable to limit its emission, then it may buy extra permits.

Operations of Carbon Trading Permits

As said above, this carbon trading scheme is known as "Cap & Trade" where the government sets an overall legal limit on emissions over a specific period of time. 

A Polluter should have enough permits for covering the emissions. Each permit in this scheme is equivalent to one tonne of Carbon dioxide equivalent,(CO2e)

In theory, permits are to be sold via auction, so that from the outset polluters are forced to pay for their emissions and are incentivized to a bare minimum the permits they seek.

To know Why Is Crypto Carbon Attracting Investors Like Mark Cuban?, read the article -> Application of Blockchain Technology In Carbon Trading