How does carbon trading work?
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Let’s say that you are king of some region. As king you decide one morning to carefully measure everyone in your kingdom’s carbon production for the month of June. After that you announce that everyone must reduce their carbon emissions by 5% from their figure in June 2024. In September, one of your royal advisors comes to you to report that while some people have easily reduced their output by 5% others are really struggling to do the same and their reductions are creating many other problems.
Since you would be a good king, you think about this for a while and decide that rather than requiring that everyone reach the same 95% of their output last year level, what you really want is for the total to be 95% of last year’s level but you don’t care who makes the cuts, so someone might cut their output by 10% or 20%, and others may not cut at all. Carbon trading is how the people who don’t cut pay the people who cut their emissions by 20% for effectively making both of their required reductions.
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