Carbon Trade

AAA

DEFINITION of 'Carbon Trade'

An exchange of credits between nations designed to reduce emissions of carbon dioxide. The carbon trade allows countries that have higher carbon emissions to purchase the right to release more carbon dioxide into the atmosphere from countries that have lower carbon emissions. The carbon trade originated with the 1997 Kyoto Protocol and is intended to reduce overall carbon dioxide emissions to 5% below 1990 levels between 2008 and 2012.

INVESTOPEDIA EXPLAINS 'Carbon Trade'

The carbon trade also refers to the ability of individual companies to trade polluting rights through a regulatory system known as cap and trade. Companies that pollute less can sell their unused pollution rights to companies that pollute more. The goal is to ensure that companies in the aggregate do not exceed a baseline level of pollution and to provide a financial incentive for companies to pollute less.



RELATED TERMS
  1. Carbon Disclosure Rating

    A numerical score that indicates the level of reporting of a ...
  2. Cap And Trade

    A regulatory system that is meant to reduce certain kinds of ...
  3. Emissions Reduction Purchase Agreement ...

    A transaction that transfers carbon credits between two parties ...
  4. Carbon Credit

    A permit that allows the holder to emit one ton of carbon dioxide. ...
  5. Rights

    A security giving stockholders entitlement to purchase new shares ...
  6. Kyoto Protocol

    An international agreement that aims to reduce carbon dioxide ...
RELATED FAQS
  1. What is the carbon trade?

    The carbon trade came about in response to the Kyoto Protocol. Signed in Kyoto, Japan, by some 180 countries in December ... Read Full Answer >>
  2. What are common reasons for governments to implement tariffs?

    A tariff is a tax imposed by a governing authority on goods or services entering or leaving the country and is typically ... Read Full Answer >>
  3. How does mercantilism impede global economic growth?

    Mercantilism impedes global economic growth by leading producers to specialize in goods and services that do not take account ... Read Full Answer >>
  4. How do "factor endowments" impact a country's comparative advantage?

    Factor endowments impact a country's comparative advantage by affecting the opportunity cost of specializing in producing ... Read Full Answer >>
  5. What does 'Incoterms' mean in relation to Ex Works (EXW) trades?

    Ex works is part of the published Incoterms and outlines the obligations of transportation to buyers and sellers. The International ... Read Full Answer >>
  6. Which factors can influence a country's balance of trade?

    A country's balance of trade is defined by its net exports (exports minus imports) and is thus influenced by all of the factors ... Read Full Answer >>
Related Articles
  1. Home & Auto

    Getting A Grip On The Cost Of Gas

    Feeling overwhelmed by rising oil prices? We offer some tips that will save you money.
  2. Home & Auto

    5 Investment Risks Created By Global Warming

    Climate-change deniers and believers alike would be wise to prepare for the worst.
  3. Active Trading

    Cheap Steps To Reduce Your Carbon Footprint

    Making small adjustments to your habits and lifestyle can have big payoffs.
  4. Economics

    Carbon Trading: Action Or Distraction?

    These credits claim to allow buyers to reduce their carbon footprints. Find out how.
  5. Insurance

    Reduce Your Carbon Tire Print

    Find out whether you should buy new, buy used or just make your machine a bit more green.
  6. Economics

    Can The U.S Close Its Trade Deficit?

    The stronger dollar could have increased the U.S. trade deficit. Instead, economic growth issues abroad and falling oil prices have helped shrink it.
  7. Personal Finance

    How A Greece Crisis Affects The U.S.

    Greece's ongoing financial crisis poses a threat to the nascent U.S. economic recovery due to the latter's close ties with Europe.
  8. Economics

    Benefits From A Tango Of China-US Trade and Debt

    China has been accumulating US debt for many decades. Here's why it continues to do so, and the risks and benefits of this for both the US and China.
  9. Investing

    Wizards Of Odd: A Trip To Tech Land

    I spent a couple of days in Silicon Valley, and here are some key lessons I learned after meeting with a number of tech CEOs and venture capitalist.
  10. Economics

    Asian LNG Prices: Not Likely To Rise Anytime Soon

    Asian LNG prices could stay low for an extended period of time, due to low oil prices, less demand and new LNG-producing projects on various continents.

You May Also Like

Hot Definitions
  1. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  2. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  3. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  4. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  5. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  6. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
Trading Center