Will Cap and Trade Be Right for Your Business

As we have been highly dependent on fossil fuels for energy source, its consequent negative environmental effects has also increased. The need to reverse such adverse effects becomes adamant as failing to address such will blow up the problem.

While we might all agree that greenhouse gas emissions need to be curtailed to prevent its adverse effects to the environment, ultimately, the government takes on a major role in initiating change in this aspect. Some are already moving in this direction, as in the United Kingdom a cap and trade carbon system has been introduced to force the largest consumers to cut back on their conventional methods and their output of these dangerous gases.

Also known as the Carbon Reduction Commitment (CRC), the cap and trade carbon system is aimed at the largest carbon producers and has been recently introduced in the United Kingdom. Over a period of time a limit is to be placed on the amount of carbon emissions considered safe and each individual organization will have to trade allowances with the government to be able to emit carbon gases at all.

The cap and trade system has been developed and has existed for quite a time. Setting a limit of requiring consumers to trade in the marketplace to achieve carbon emissions reduction is not a new concept, however, commodity pricing for carbon emissions is something new. Many eyes are on the British initiative to see how it works, as it is likely to be adopted in similar format in many other countries.

The government of Britain has identified approximately 5,000 companies to be the major producers of carbon emissions due to the burning of fossil fuels for its energy requirements. In two years time, every company shall be required to curtail carbon footprint, in compliance of the cap and trade carbon system. Those who do not effectively reduce carbon footprint will find heavier costs on purchasing carbon allowances and will also risk its reputation to suffer as under-performance win carbon reduction targets will be made known to the society.

The Carbon Reduction Commitment has set goals of reducing the overall level of emissions each year up until 2050, by which time the intention is that carbon emissions will have been reduced by 80%. There is a pressing need for this action in order to prevent a more devastating and irreversible damage to our environment by uncontrolled carbon emissions.

In the United States, a legislation that seeks to adopt a program which is similar to that of the British cap and trade carbon system is being considered by mid to late 2009.

While it is unrealistic to expect companies and individuals to make significant attempts to reduce their carbon footprints without encouragement by the government, the jury is still out as to whether a cap and trade carbon system is the right approach or not.

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