1) **Establish a Carbon Pricing Mechanism**: Carbon pricing is the economic policy to lower greenhouse gas emissions. It creates a financial disincentive for emitting carbon dioxide and gives polluters a financial incentive to reduce emissions.
2) **Agree on a Common Standard**: Nations must agree upon a common standard for what constitutes a carbon credit. This could be facilitated by an international body, such as the United Nations Framework Convention on Climate Change (UNFCCC).
3) **Quantify Emissions**: An international committee should be responsible for quantifying emissions from each nation, which would require accurate and reliable tracking systems. Emissions must be quantified consistently across all countries.
4) **Issue Credits**: Once carbon emissions are quantified, allocate credits to each nation. Nations that produce more carbon emissions than their allotted credits must buy more credits.
5) **Set up a Trading Platform**: Establish a global online platform or marketplace where nations can trade their carbon credits. Countries with surplus credits can sell to those needing more.
6) **Verification and Monitoring**: An international body must be responsible for verifying and monitoring carbon emissions and the trade of credits. This ensures transparency and accountability.
7) **Penalties and Incentives**: Enforce penalties to those who exceed their carbon limit without purchasing extra credits. Provide incentives to nations reducing their carbon footprint.
8) **Periodic Reassessment and Adjustment**: Regularly reassess each nation's carbon emissions and adjust credit allocation accordingly.
Examples:
- The European Union’s Emission Trading System (EU ETS) is a prominent carbon trading system where companies can buy or sell emission allowances as required.
- The Clean Development Mechanism (CDM), a provision of the Kyoto Protocol, enables developed countries to invest in emission reductions projects in developing countries and to earn carbon credits.
Requisites:
- Building the infrastructure for this system would necessitate the use of advanced technologies for monitoring and verifying emissions.
- Setting up international committees and bodies for regulation.
- Changes in national laws to comply with the global carbon trading system.
Costs:
- The cost would largely depend on the infrastructure needed in each country to monitor and record their carbon emissions. According to the World Bank estimation in 2019, the cost of carbon pricing varies from $1 to $127 per tonne of CO2 across the world.
- Implementation cost for global trading platforms and international regulatory bodies.
- The cost incurred by countries for buying carbon credits.
- Cost of penalties for those who exceed their carbon limit.
The overall expense would be colossal but worth the investment, considering the catastrophic impact of climate change on the economy and human lives. The potential for implementing a global carbon trading system lies in the belief that it could create a sustained reduction in greenhouse gas emissions and motivate nations to transition to renewable energy sources.