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How Carbon Markets Work
- Carbon markets turn pollution into tradeable credits, incentivizing companies to limit emissions.
- Compliance markets, like the EU ETS, reduce total permits annually for overall emission cuts.
Balancing Carbon Pricing
- Compliance markets use carbon pricing to balance economy and pollution, avoiding bankruptcies or low penalties.
- Too-high prices risk business collapse, too-low prices fail to curb emissions effectively.
Understanding Voluntary Markets
- Voluntary carbon markets allow companies not regulated by compliance systems to offset emissions via project-backed credits.
- Offsets fund projects like reforestation or carbon capture but vary widely in quality and impact.