This talk will explain how carbon emissions trading works and illustrate some contracts through the Ulster University Bloomberg Trading Laboratory.
Carbon emissions trading is a mechanism, known as cap-and-trade. It aims to reduce greenhouse gas emissions by setting a cap on the total amount of emissions that can be released by a group of sources (e.g., a country, a sector, or a group of companies). This cap is typically expressed in terms of carbon dioxide equivalent (CO2e), which is a measure of the global warming potential of different greenhouse gases.
Emissions trading is an important tool for achieving net zero emissions because it allows governments to set a clear and ambitious target for reducing emissions, and provides a mechanism for achieving that target by creating a market for emissions reductions. By creating a financial incentive for sources to reduce their emissions, emissions trading can help drive the deployment of low-carbon technologies and practices, and support the transition to a more sustainable and low-carbon economy.
In addition to being an effective policy instrument for reducing emissions, emissions trading can also provide a range of other benefits, including increased transparency and accountability in the emissions reduction process, and the potential for generating revenue for governments through the sale of emissions units.