Emissions Trading: market research reports

Emissions trading involves the commodization of greenhouse gas (GHG) emissions such as carbon dioxide (CO2), nitrogen oxides (NOx) as well as other air pollutants through the government or regulatory creation of a market that aims to reduce or otherwise affect the volumes and distribution of GHG and air pollutant emissions and to gradually mitigate climate change, regional and national air pollution, and to meet regulatory targets.

Emissions trading in some forms is known as cap-and-trade, when emitters and create additional tradable credits by offsetting or reducing emissions. Various forms of emissions trading schemes (ETS) have been implemented, proposed or otherwise theorized, with the most notable pursued or otherwise outlined by the Kyoto Protocol and the European Union (EU) Emissions Trading Scheme. An acid rain emissions trading system has been used in the United States to reduce national sulfur dioxide (SO2) emissions. Some form of emissions trading has been passed or implemented also in Japan, Australia, and New Zealand.

In contrast to free market practices (no regulation) or hard regulatory caps, emissions trading seeks to meet emissions reductions through incentivizing private sector investments in air emissions (pollution) control equipment and other preventive practices and infrastructure known as offsets, although ETSs actually represent the penalization of non-action or failure to achieve emissions reductions through imposed fines. Most emissions trading schemes work off of an emissions cap or regulatory-imposed maximum limit on emissions for any emitting entity (e.g. factory, utility company, power plant), any emissions in volume above the cap are permitted through emissions allowances, also known as carbon credits, carbon allowances and permits, that must be purchased on a trading market. Emissions permits or credits are gradually retired with trades to affect reductions.