The radiation coming from the sun to the maximum extent is owed to the visible light and due to a small amount of ultraviolet and infrared rays. These radiations keep the earth’s surface warm .Along Twith this; the earth’s surface also radiates heat known as infrared radiations. There are certain molecules known as CFC’s which are released from sources like air conditioners; deodorants etc, which absorbs radiations from the earth’s surface and deflects them, back to the earth’s surface.

This helps in maintaining the temperature on the earth’s surface at about 15 degrees which is very important for the survival of mankind. This is known as the Green house effect. But due to increased pollution, all the heat radiations in excess cause the rays deflect back to the earth’s surface which increase the earth’s temperature and cause global warming. It can have a lot of effects like rise in water levels in oceans which may cause certain cities to disappear, causes floods, hurricanes and cyclones, changes in the climatic cycle and spreading of diseases like malaria, typhoid, cholera, dengue fever etc.

Now that the problem of global warming is rampant all over the world and carbon being the main culprit, Carbon Trading is one of the most important strategies adopted. In this world of globalization, free – market economies and industrialization it is impossible for any industry to reduce the amount of production it does lest it will be in loss. And more production leads to more pollution and moreover the release of greenhouse gases and in particular Carbon leads to global warming. So, there came a solution to this problem. And the solution is Carbon Trading.

It is an effort on the part of the administration to provide economic incentives to drastically reduce the level of the emission of the pollutants. How does it do so? A central authority sets a limit on the amount of the pollutant (any substance a solid, liquid or a gas which is harmful to the environment) which can be released. Companies issued emission permits. For a particular amount of pollutant not released certain credits are given. A credit represents the right to emit a specific amount of pollutant. Amount of carbon released must not be more than the allotted credits thus maintaining the level of pollutants required. So, the companies which need more carbon to be emitted must buy it from the company which releases it less. So, the buyer is paying a charge for polluting while the seller is rewarded for having reduced pollution than what was needed. In simple words, If a company “A” is emitting 110 credits of carbon and a company “B” is emitting 90 credits of carbon while the limit to the release of carbon is 100, then the company “A” can buy 10 credits of carbon from company “B”. In this way, Company “A” has to pay for releasing more pollutant while company “B” is being profited for releasing more pollutants.

So where does it all happen? There are several active trade houses for several pollutants. For Green House gases, there is the European Union Emission Trading Scheme. In US, there is a national market to reduce acid rains to reduce the emissions of NO2 and SO2 which cause the acid rains (I hope you know the reason why The Taj Mahal is getting yellowier).

And how did it all start? Flipping the pages of history, the beginning was the gestation period wherein the “Flexible Regulation” Policy was launched by the United States of America. Then was passed the Clean Air Act 1977 and Carbon Emission Certificates were issued. This stage is known as the “Proof of Principle”. Then was launched “Project 88” which brought all the Environmental Agencies in the US together. Then was launched the US Clean Air Policy which led to the formation of the Global Climate Policy. Further, the formation of Carbon Market led to the formation of the Carbon Industry which is now a multimillion dollar industry worldwide.

There are two types of Carbon Trading “Cap and Trade” and “Baseline and Credit”. In “Cap and Trade”, limit on all sources is allowed to established and then allowed to trade among themselves. In Cap and Trade, industries which cause no pollution at all take advantage, i.e. they sell credits to a company and earn more profits. Take the example of a small scale
industry like Charka industry which makes clothes and causes no pollution .But this will sell all the credits to a big company and help in creating more pollution. In many organizations, companies which don’t pollute can purchase credits and sell it at a very high price so that prices go high according to the law of demand. This is in fact one way which is reducing pollution because when the prices are high then the companies would do their best to reduce pollution. Also there are provisions wherein Corporations can donate their credits to NGO’s and be eligible for tax donations.

Since this process involves the use of market to determine the use of market to deal with the problem of pollution, it is known as “Free Market Environmentalism”. But the level of pollution remains the same. So some techniques must be adopted for the same. Some of them include using quality instrument to reduce pollution, capping the maximum permit price. Recently “Carbon tax” is being planned like income tax which can be the most effective scheme.

It’s high time that we start to look out for measures to reduce pollution levels or else our world will be in danger and a time will come when we will question our existence.