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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 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.

EU ETS myth busting: Why it can’t be reformed and shouldn’t be replicated

Given the urgent need to limit  global warming, it is vital that the European Union (EU) gives itself the best tools with which to reduce greenhouse gas emissions. Since the launch of the EU's ‘cornerstone policy’ to reduce emissions — the European Union Emissions Trading System (EU ETS), emissions have risen; there is increased reliance on coal; the price of consumer energy has risen along with the profits of many industrial actors (as a direct result of the EU ETS) and millions of euros of public money have been lost in VAT fraud.

PDF iconMyths_internet.pdf1.23 MB

FERN launches new trilingual carbon trading blog

Not a day goes by without more evidence of failed carbon offsets, fraud and crime, and windfall profits for the industries who were meant to be penalised by putting a price on carbon. Even market actors are losing interest, and record numbers of carbon-trading desks are closing shop.

ETS reforms steal attention from measures that could actually work

FERN wrote this guest commentary for PointCarbon ( to highlight that the time has come to give up waiting for the "market" to deliver the structural changes needed to keep global warming below two degrees and start taking direct action.

PDF iconGuest commentary.pdf431.19 KB

Input to the consultation on structural options to strengthen the EU Emission Trading System

This input to the European Commission consultation on options to stregthen the EU Emissions Trading Scheme (ETS) was signed onto by 21 organisations. It raised only was concern, that the consultation excludes a fundamental, seventh option: ending the ETS by 2020 and replacing it with other regulatory climate policies. This is a serious omission that leaves this consultation incomplete as an input toward a legislative proposal. After two years of decline, the prices of emission permits and carbon credits have reached historic lows.

It is time for the EU to scrap its carbon emissions trading system

This press release accompanies a joint declaration by more than 90 organisations, networks and movements from all over the world. 'It is Time to Scrap the ETS' lists the structural flaws of the ETS and the risks of trying to fix it. The organisations supporting this declaration conclude: “It is time to stop fixating on ‘price’as a driver for change. We need to scrap the EU ETS and implement effective and fair climate policies by making the necessary transition away from fossil fuel dependency.”

PDF iconScrap_ETS_Press_Release_18Feb.pdf23.92 KB