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♤ An organisation which produces one tonne less of carbon or carbon dioxide equivalent than the standard level of carbon emission allowed for its outfit or activity, earns a carbon credit.
How does it help?
♤ Countries which are signatories to the Kyoto Protocol under the UNFCCC have laid down gas emission norms for their companies to be met by 2012. In such cases, a company has two ways to reduce emissions.
(i) It can reduce the GHG (greenhouse gases) by adopting new technology or improving upon the existing technology to attain the new norms for emission of gases.
(ii) It can tie up with developing nations and help them set up new technology that is eco-friendly, thereby helping developing country or its companies ‘earn’ credits. This credit becomes a permit for the company to emit GHGs in its own country. However, only a portion of carbon credits of the company in developing country can be transferred to the company in developed country.
Developing countries
♤ Developing countries like India and China are likely to emerge as the biggest sellers and Europe is going to be the biggest buyers of carbon credits.
♤ Last year global carbon credit trading was estimated at $5 billion, with India’s contribution at around $1 billion.
♤ China is currently the largest seller of carbon credits controlling about 70% of the market share.
♤ Carbon, like any other commodity, has begun to be traded on India’s Multi Commodity Exchange.
♤ MCX has become first exchange in Asia to trade carbon credits.
Do you know?
Several species of nitrogen-fixing bacteria of Rhizo-bium, live inside the root nodules of leguminous trees. Similarly, Frankia, a nitrogen-fixing mycelial bacterium, is associated symbiotically with the root nodules of several non-legume plants, including Alnus, Casuarina, Coriaria, Myrica and Rubus. Both Rhizo-bium and Frankia are capable of fixing atmospheric nitrogen.
♤ Carbon offsets are credits for reductions in greenhouse gas emissions made at another location, such as wind farms which create renewable energy and reduce the need for fossil-fuel powered energy.
♤ Carbon offsets are quantified and sold in metric tonnes of carbon dioxide equivalent (CO2e).
♤ Buying one tonne of carbon offsets means there will be one less tonne of carbon dioxide in the atmosphere than there would otherwise have been.
♤ Carbon offsetting is often the fastest way to achieve the deepest reductions within businesses and it also often delivers added benefits at the project site, such as employment opportunities, community development programmes and training and education.
♤ For a carbon offset to be credible it must meet essential quality criteria, including proof that it is additional (the reduction in emissions would not have occurred without the carbon finance), that it will be retired from the carbon market so it cannot be double counted, and that it addresses issues such as permanence (it delivers the reductions it stated) and leakage (the emission reduction in one area doesn’t cause an increase in emissions somewhere else)
Example:
♤ Business A1 is unable to reduce 100 tonnes of its CO
2 emissions in the short term.
♤ There is a project somewhere else in the world which could save 100 tonnes easily, but they need a cash injection.
♤ For example, a community in India could swap from carbon intensive kerosene as an energy source to solar panels - but they can’t afford the solar panels.
♤ Through the purchase of carbon offsets, you provide the financial assistance to subsidise the cost of getting solar panels onto housing, and through that means you have enabled a saving of 100 tonnes of CO2.
♤ Business A1 has therefore reduced global net CO2 emissions by 100 tonnes.
♤ The added benefit is that Business A1 has helped facilitate a step change in local technology in a developing market.