How can we pay for black carbon reduction programs in places that do not have the money to pay for them? Countries need to use the same market techniques that have financed traditional greenhouse gas reduction and clean energy projects like solar farms and wind farms. Carbon trading, also known as cap and trade in the US, provides a strong financial incentive for reducing emissions.
The concept of carbon trading emerged from the Kyoto Protocol as a way for countries to trade their greenhouse gas emission rights. With a set number of emission rights, a country that had a hard time reducing its emissions could essentially pay another country to reduce its emissions by the appropriate amount. The argument was that it would be cheaper for a less developed country to reduce emissions than it would be for a developed country, but the goal of emission reduction would still be achieved.
There are two ways a carbon trading system can work. One is where countries or companies are given an emission cap, or certain number of emission permits, and can then buy and sell these carbon credits privately or on the international market through several exchanges. The second carbon trading system that is gaining in popularity is when companies and countries trade carbon credits by voluntary means, with no cap in place.
With emissions trading, companies – and countries – have a profit incentive to reduce emissions (sale of carbon credits), and the markets that develop around the trade of these credits are valued in the tens of billions of dollars. While, carbon-trading systems face criticism from opponents on both the environmental and business sides, recent history also shows the systems work. In the US, a cap-and-trade system was included in the 1990 Clean Air Act, and many see it as having been important in reducing sulfur-related acid rain.