Everyone has been poluting for a while and getting away with it. Within the last decade, governments have agreed to tax this pollution in an effort to reduce global pollution and climate impact as a result. The conclusion of that agreement created Carbon Credits. A commodity to be traded like gold or oil, this product can also be generated.
Its simple, adopt a technology or method with measurable emission reduction and you can have that evaluated to be a carbon credit. How the common man can generate a carbon credit is still being debated. However, the markets are now in the hundreds of millions and fines for pollution trickle down to the common man.
In 1997 a protocol to the UNFCC (United Nations Framework Convention on Climate Change) was initially adopted for use, in Kyoto Japan, and is commonly known as Kyoto protocol. This protocol legally binds the parties (industrialized countries) to the protocol to reduce their Green House Gas (GHG) emissions.
This protocol defines mechanisms like Emissions Trading and Clean Development Mechanisms that allow industrialized nations to meet their GHG obligations by buying GHG reduction credits from other countries. Thus allowing third world countries to carry out projects under Clean Development Mechanism and make a profit by trading the carbon credits with developed countries. In essence it means that if a country cannot meet its Green House Gas reduction target, it can buy credits from other countries that have credits in excess.
As a result Carbon has become a commodity, which like other commodities, is traded in open market, called carbon market. According to pointcarbon.com report “The total traded volume in the global carbon market grew from 1.6 Gt (1.6 billion tonnes) in 2006, to 2.7 Gt in 2007 — an increase of 64 percent (see Figure 2.1). The value of the carbon traded grew even more, by 80 percent in the same period, from €22bn ($33bn) to €40bn ($60bn).
Its easy with the lack of information to get, carbon credits and offsets confused. Fundamentally, carbon credits and offsets are the same thing, both being equal to one metric ton of GHG emissions. Some people argue differently, however. Most of the differences in their interpretation relate to the various scenarios in which the words are used, and for what purpose the credits or offsets are used. The carbon language everyone is using at the moment is still new and therefore changes regularly. We hope that for everyone’s sake it will develop over time and become clearer.
The European Union Emissions Trading Scheme (EU ETS)
Also known as the European Union Emissions Trading System, this is the largest multi-national carbon emissions trading scheme in the world and a major pillar of EU climate policy. The EU ETS carbon credit scheme currently covers more than 10,000 installations with a net heat excess of 20 MW in the energy and industrial sectors which are collectively responsible for close to half of the EU’s emissions of CO2 and 40% of its total greenhouse gas emissions.
Besides receiving this initial allocation, an operator may purchase EU and international carbon credits. If an installation has performed well at reducing its carbon emissions then it has the opportunity to trade its remaining carbon credits and make a profit. This allows the carbon trading system to be more self contained and be part of the stock exchange with little government intervention.
Kyoto-CERs (Certified Emissions Reduction)
The Kyoto Protocol is an agreement made under the United Nations Framework Convention on Climate Change (UNFCCC). Countries that ratify this protocol commit to reducing their emissions of carbon dioxide and five other greenhouse gases (GHG), or engaging in emissions trading if they maintain or increase emissions of these green house gases.
The Kyoto Protocol now covers more than 170 countries globally but only 60% of countries in terms of global greenhouse gas emissions. As of December 2007, the US and Kazakhstan are the only signatory nations not to have ratified the act. The first commitment period of the Kyoto Protocol ended in 2012, and international talks began in May 2007 on a subsequent commitment period
VERs (Voluntary/Verified Emissions Reductions)
Both refer to the emerging market for carbon credits and carbon trading outside the Kyoto Protocol compliance regime. The voluntary market may at present be smaller and less liquid than the compliance market for carbon credits, however, general market opinion is that the wider scope of the voluntary market, and growth led by the private sector, not public policy, means that it has strong potential to outstrip the market size of the compliance regime.
Whether you see it or not, you are being fined for your impact on the environment. This process is here to stay and will only grow over time. Whether you love the environment or not, there is profit to be made in this commodity market.
This market is well defined and companies make money in it today. This community was engineered to help you find ways to generate and trade carbon credits. The principals are sound and there is no reason why together, communities, NGO’s, neighbourhoods, schools, etc cannot impact the environment while benefiting from carbon credits.