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PRERNA FOR IAS
CARBON TRADING
1. Introduction to Carbon Trading
Carbon trading, also known as emissions trading, is a market-based mechanism designed to reduce greenhouse gas emissions. It places a financial cost on carbon dioxide and other pollutants, encouraging industries to lower their emissions. Under this system, companies that emit less than their permitted limit can sell their unused allowances to others. This creates an economic incentive for cleaner production and innovation. Carbon trading transforms environmental protection into a market-driven approach where reducing pollution becomes financially beneficial. It emerged as an important climate policy tool under international agreements and is widely used to support sustainable development and climate change mitigation.
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Learn how carbon trading works as a market-based mechanism to reduce greenhouse gas emissions. Explore cap-and-trade systems, carbon credits, and global trading schemes.
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