Carbon trading
Carbon emissions trading is based around setting national caps for carbon emissions. Within the national cap, quotas are established for manufacturers and companies in terms of the amount of CO2 emissions they are allowed to produce. If they want to exceed their agreed quota, companies need to buy more carbon credits. Europe established a market for carbon trading in 2005. Carbon trading remains complicated and open to financial manipulation. Quotas tend to be agreed based more on the ability of a country to meet them rather than on what emissions are needed globally to mitigate global warming. Agreement both on the quantities of carbon specific industries and companies are allowed to emit, and the amount actually emitted remains a topic of debate. Current prices for Carbon credits are unrealistically low, though they are expected to rise once the market becomes more established. The European Emissions Trading Scheme (EU ETS) should eventually lead to very considerable benefits, particularly once a global trading system is established.
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Useful links
Wikipedia Some useful definitions
The Corner House A critical discussion of the benefits of carbon trading
Carbon Positive Rising prices for EU carbon prices
The Corner House Carry on polluting. Why carbon trading won’t work!
New Scientist Article by Andrew Sims - Carbon trading won't stop climate change
Open Europe The EU Emissions Trading Scheme: an environmental and economic failure (pdf)