Carbon Trading


2005-1-13

I'm Gwen Outen with the VOA Special English Economics Report.

Carbon trading has its roots in the Kyoto Protocol. This is theinternational agreement to reduce levels of industrial gasesbelieved to cause climate change. Many scientists link warmertemperatures to carbon dioxide and other pollutants.

One way carbon dioxide enters the atmosphere is when oil andother carbon-based fuels are burned. Under the Kyoto Protocol,companies have an allowance. This is the amount of carbon dioxidethey are permitted to release.

Companies can go over their limit. But they must buy credits fromcompanies that have more than they need. These are companies thathave not used all of their allowance. Each credit permits the holderto release one ton of carbon into the atmosphere.

Carbon credits have been traded unofficially since two thousandthree. Since then, the price of a credit has risen by about fortypercent. Now, the European Union will require factories and powerstations in the twenty-five member countries to use the system. Aprogram called the European Emissions Trading Scheme took effect onJanuary first.

Only companies in industries that produce large amounts of carbondioxide must take part in the system. But anyone can buy carboncredits in financial markets.

Nord Pool, the Nordic Power Exchange, has already begun to tradecarbon credits. The European Climate Exchange, in the Netherlands,is to officially start trading in February. Euronext and theEuropean Energy Exchange in Germany have also announced plans totrade carbon credits.

Experts say the market could grow to nineteen thousand milliondollars by two thousand ten.

A group of companies created the Chicago Climate Exchange in twothousand three. But carbon trading in the United States is not basedon legal limits, as in Europe.

About one hundred thirty nations have signed the Kyoto Protocol.The United States has not approved it. This is largely because bigdeveloping countries like China and India are not required to makethe same cuts as wealthier nations.

But enough nations have approved the Kyoto Protocol for thetreaty to take effect next month. It aims to reduce the amount ofcarbon dioxide produced in the world to below levels recorded innineteen ninety. This is supposed to happen by two thousand twelve.

This VOA Special English Economics Report was written by MarioRitter. I'm Gwen Outen.