Skip to Content

What is carbon trading?

Carbon trading is the process of buying and selling permits and credits to emit carbon dioxide. It has been a central pillar of the EU’s efforts to slow climate change. The world’s biggest carbon trading system is the European Union Emissions Trading System (EU ETS). It is beset with problems and corruption and yet countries such as Brazil and China continue to pursue carbon trading as a way to tackle rising emissions.

Carbon trading is increasingly criticised, not least because carbon dioxide emissions in industrialised countries are not declining at the necessary rate to avert catastrophic climate change.

For more information about carbon trading, see Fern’s beginners guide Trading Carbon. How it works and why it's controversial, or the 20 page version 20 page version Designed to fail.

Fern and many scientists, economists and NGOs believe that carbon trading is a dangerous distraction from the need to end fossil fuel use and move to a low carbon future. We do not have time to wait for a high price on carbon: we must shift to a low carbon energy, agriculture, transport and industrial world now. The best way to do this is through direct regulation.

Fern’s initial interest in carbon trading came about because trees were seen as a way of offsetting carbon cheaply, while simultaneously providing money to protect trees. What are offsets explains why you can never offset carbon by protecting or planting trees. There is also no evidence that carbon trading has lived up to the promise of providing money.

Despite the flaws inherent in pollution trading, the concept continues to appear in proposals to reduce environmental harm. For more information visit our campaign on biodiversity offsetting.


Most recent publications

NGO Report reveals why EU should not fund forest carbon projects

Ten years ago, the EU invested over 1.5 million Euros in the N’hambita carbon project in Mozambique, a model scheme to show how forests could be used to offset industrial emissions. This press release coincides with the release of a report – ‘Carbon Discredited' -  explaining why forest carbon projects fail to provide climate, environment, development  or financial gains. The organisations call on the EU and Member States to stop funding carbon offset projects, including REDD+ projects.

Carbon Discredited: Why the EU should steer clear of forest carbon offsets

The N’hambita Forest Carbon Offset Pilot Project, run by the company Envirotrade, and initially funded by European Commission (EC) money, has failed to deliver most of its climate change, development, financial and learning objectives. Envirotrade suggest that emissions have been offset against supposed carbon stores in Mozambique, which they cannot calculate because of the problems inherent in baselines and the impossibility of verifying claimed savings. 

PDF iconNhambita_internet.pdf773.13 KB

EU ETS manipulates State Aid Rules: UK uses public money to subsidise polluters

Released on 3 June 2013, the day energy intensive industries in the United Kingdom (UK) may apply for subsidies of up to Euro 295 million to offset any increase in energy prices as a result of the European Union Emissions Trading Scheme (EU ETS), this press release launches FERN's new briefing "Subsidising climate change" which puts these subsidies into a context of low carbon prices and historic windfall profits for industry from the EU ETS.

PDF iconState Aid Press Release_Final.pdf319.53 KB

Subsidising Climate Change: How industry uses the EU ETS to manipulate State Aid rules for their own profit

This short briefing looking at how State Aid is being used to offset the indirect costs of the EU Emissions Trading Scheme (EU ETS). The Commission is attempting to remedy the low price of carbon, but State Aid guidelines mean that Member States can use public money to cushion any increase in price that is achieved. The briefing concludes that price-driven tools will never be strong enough to shift the EU out of fossil fuel and into sustainable renewable energy.

Europe cannot drill its way to a low-carbon economy, say climate justice groups

This press release warns that EU leaders' discussions about how to lower energy prices and ‘improve’ European industrial competitiveness must not be a smoke-screen for furthering fossil fuel extraction including shale gas.

PDF iconPR_May22_EnergySummit.pdf20.03 KB

NGO report busts the myths of the Emissions Trading Scheme

This press release European Parliament was launched in advance of a vote on the European Commission's proposal to backload 900 million emissions permits within the EU Emissions Trading Scheme (EU ETS). This vote assumes the EU ETS can be reformed, but ahead of the vote, a new report shows that the problems of the EU ETS are systemic and unresolvable. Keeping this failed system in place would further delay real action to reduce emissions in Europe.