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The Market Of Carbon Credits Explained

From watching the video above, it’s clear that the carbon credits system, while inventive, is not free of flaws. Too many versions of this ‘cap-and-trade’ system have been implemented around the world and as a result, the lack of a universal market has rendered the whole system not as effective as intended.

One thing this system DOES get right is using money as a way to fight climate change. During the 23rd Conference of Parties (COP23) in Bonn, Germany, the consensus among world leaders was that taxing fossil fuels and subsidizing renewable energy was the best way to change people’s behavior.

One way to do this that is less complex than the carbon credits system is imposing a ‘carbon tax’.

Carbon Tax

Presently, fossil fuels are used so extensively in many industries because they are cheaper so they bring down the cost of production. Meanwhile, developing and harnessing technology for renewable energy is more expensive. If a carbon tax is levied on the carbon content of fuels, the usage of fossil fuels (that emits lots of carbon) would be way more expensive than the usage of renewable sources of energy, making it more desirable and by extension, helping the planet.

Many countries that begun levying this carbon tax, but many have also started incentivizing clean energy. Here’s an infographic of who subsidizes what.

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