The Carbon Market Incentivises Eco-friendly Business Practices

One of the big successes of the carbon market is that it has converged together environmental concerns and financial trends. The carbon market has put a price on emission of greenhouse gases and this is making companies finally take note of their emissions and to become more environmentally responsible.

The success of the EU carbon market is noteworthy in this regard. The EU's strict compliance laws have made the EU's emissions trading scheme (ETS) dominate the global carbon market; moreover, these stringent caps are compelling the European private sector to get serious about its emissions. European companies are not only aggressively partaking in carbon trading but are also earnestly exploring opportunities to reduce emissions. Investment decisions by European industries now take into account the carbon price and the related cost of polluting the air with greenhouse gases. 73 per cent of the EU ETS respondents in the Carbon Market Survey 2008 by Point Carbon said that the carbon price is relevant to investment decisions. As the carbon market matures further, we can expect the carbon price to play an even stronger role in the investment and financial decisions of companies.

Similarly, in the developing world, the carbon market is creating lucrative incentives for companies to adopt green policies and to reduce their polluting activities. Industries of the developing world can now earn ready cash for every pollution-saving measure they undertake.

This is a win for the environmental movement. Traditionally private companies have known to be committed to their profit margins and not to environmental concerns. But the carbon market has meshed environmental causes with economic profitability and the private sector is now batting on the same side of climate change policy as the environmentalists.

Thus, for the first time, market forces are working in tandem with governmental regulatory forces and environmental causes. And one can be confident that this trend will not only continue but also get stronger in the near future.