How does carbon trading work?
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It’s a capitalist way of trying to combat climate change, which doesn’t take into account that capitalism seeks infinite growth in a world with limited resources and it encourages overproduction and overconsumption, but oh well…
Ignoring the actual source of the problem, it’s actually really interesting economically. Something that capitalism does the best is specialization/efficiency. You have a job, let’s say nurse, that’s in theory the thing you are the best at. You become better at it, John focuses on being a barista, Laura focuses on singing, etcetera. This leaves us with a better healthcare, better coffee, and better music than if everyone tried to do everything by themselves.
So, going back to the topic. The government says “Coca-Cola, you are producing 10 billion plastic bottles a year, you are emitting 20 tons of CO2, you gotta get that number down to 15 tons”. This of course doesn’t address the question of why it’s producing 10 billion plastic bottles in the first place, but oh well. Reengineering bottles facilities, finding new materials, etcetera, would cost a lot of money, time, expertise, etcetera. So, we give Coca-Cola the option to just purchase carbon credits. Another company will focus on taking CO2 out of the atmosphere. They only do this, this all they do, so they get better at it. They remove 5 tons of CO2, they create a coupon that’s worth -5 tons. Coca-Cola buys it. Coca-Cola tells the government “I still emitted 20 tons but I got this -5 coupon so it counts as 15”. The government says okay.
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