A carbon credit trading system is a market-based tool designed to reduce greenhouse gas emissions by putting a price on carbon pollution. It allows governments, companies, and other entities to buy and sell carbon credits—essentially, permits that allow the emission of a certain amount of carbon dioxide or other greenhouse gases.
How It Works
Under this system, a government or regulatory body sets a limit (cap) on total emissions allowed from certain sectors. Organizations that reduce their emissions below their assigned limit can sell their unused credits to others who exceed theirs. This creates a financial incentive for businesses to invest in cleaner technologies and adopt more sustainable practices.
For example:
- If a power plant emits less CO₂ than its allowance, it can sell its surplus credits.
- If another plant exceeds its limit, it must buy credits to cover the excess.
Why It Matters for Iraq
For Iraq, adopting a carbon credit trading system is a step toward environmental sustainability, economic diversification, and alignment with international climate commitments. It allows Iraq to:
- Encourage cleaner industrial practices
- Monetize reductions in emissions
- Participate in global carbon markets
- Attract investment in renewable energy and green infrastructure
As Iraq works to modernize its energy sector and reduce carbon emissions—especially from practices like gas flaring—a carbon credit system offers a practical, flexible path forward.
Looking Ahead
The Government of Iraq, through initiatives such as the GCCE, is exploring frameworks for launching a national carbon credit system that supports our environmental goals while creating new economic opportunities. By integrating with regional and international markets, Iraq can become a proactive player in the global effort to combat climate change.
