Carbon Credits and Other Market Based Mechanisms

Abstract

The global carbon credit mechanism is a market-oriented solution to environmental problems, particularly the reduction of greenhouse gases including carbon dioxide. This mechanism requires a number of countries and corporations to reduce their greenhouse gas emissions or to purchase emission reduction quantity (also called carbon credits) from countries or corporations with a surplus. The purpose of this study is to analyze the creation and nature of the carbon credits market and to examine how these credits are traded in global climate exchanges. This is an exploratory and analytical study in which secondary sources are utilized. The climate exchanges have encouraged developing as well as developed countries to invest in renewable energy sources including solar energy. It is concluded that carbon credits trading has real economic benefits for both sides.