Will Cap and Trade Be Right For Your Business

By Daniel Stouffer Platinum Quality Author

Over the decades, we have continuously been dependent on fossil fuels for our energy requirements. Consequently, environmental damage has increased due to the carbon emissions which result from the burning of fossil fuels. The need to curtail the adverse effects to the environment puts pressure on companies to mind their greenhouse gas emissions.

While we might all agree that greenhouse gas emissions need to be curtailed to prevent its adverse effects to the environment, ultimately, the government takes on a major role in initiating change in this aspect. Some are already moving in this direction, as in the United Kingdom a cap and trade carbon system has been introduced to force the largest consumers to cut back on their conventional methods and their output of these dangerous gases.

The cap and trade carbon system recently introduced in the UK is known as the Carbon Reduction Commitment and the legislation is aimed at the largest producers. Over a period of time a limit is to be placed on the amount of carbon emissions considered safe and each individual organization will have to trade allowances with the government to be able to emit carbon gases at all.

The cap and trade system has been developed and has existed for quite a time. The concept of setting a limit and forcing those consumers to trade in the marketplace to achieve overall reduction is not a new one, but the establishment of a commodity price for carbon emissions is. Many eyes are on the British initiative to see how it works, as it is likely to be adopted in similar format in many other countries.

The British government has decided that approximately 5,000 companies in the country are major producers of greenhouse gases due to their consumption of energy. In two years time, every company shall be required to curtail carbon footprint, in compliance of the cap and trade carbon system. Those who do not effectively reduce carbon footprint will find heavier costs on purchasing carbon allowances and will also risk its reputation to suffer as under-performance win carbon reduction targets will be made known to the society.

The Carbon Reduction Commitment has set goals of reducing the overall level of emissions each year up until 2050, by which time the intention is that carbon emissions will have been reduced by 80%. There is a pressing need for this action in order to prevent a more devastating and irreversible damage to our environment by uncontrolled carbon emissions.

The cap and trade carbon system adopted by the British may well appear in the United States as well, as legislation being considered in mid to late 2009 seeks to adopt a similar program.

While it is unrealistic to expect companies and individuals to make significant attempts to reduce their carbon footprints without encouragement by the government, the jury is still out as to whether a cap and trade carbon system is the right approach or not.

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