Carbon Credits, Free Essay Example

Greenhouse gases have become a leading cause of climate change in the world creating a global panic (Isah, 2013). Carbon dioxide the most common of the green house gases is produced through the burning of fossil fuels in manufacturing industries i.e. power, cement, and many others has continually trapped infrared energy thereby contributing majorly to global warming. To contain this crisis, the international community agreed to cut down on the discharge of carbon gases through a protocol which was implimentated in 2005.The Kyoto protocol tries to initiate the reduction of green house gases emission through the adoption of carbon credits (Bohringer & Loaches, 2002). Carbon credits refers to international emission trading norms in which countries or companies that have considerably cut down on the emission of GHG are issued with incentives that mainly takes monetary value form. This value depends on the total amount of the capped annual emission. Carbon credits can be exchanged mainly by business, countries or individuals through buying and selling at the prevailing market price on the international market.

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Under the Kyoto protocol, developed countries mostly in Europe agreed to cut down on the emission of greenhouse to considerate levels ("EU agrees to 20% CO2 cut", 2007). Companies, predominantly manufacturing industries found in European countries are therefore required to adopt or improve their existing technology to new eco-friendly technology or team up with developing countries such as India or China and enable them set new eco-friendly technology thereby earning carbon credits. Although America did not sign the Kyoto protocol, carbon credit has been a huge success with a total of 192 countries having signed the agreement by 2012 .China and India are reported to be biggest sellers while Europe the biggest buyers (Flues, 2011). Carbon credits have been traded in various security exchanges worldwide notably in Asia at India's Multi Commodity Exchange generating 30 million carbon credit in exchange.

The creation of Carbon Credits involves the application of the principle of supplementary within the Kyoto protocol. This principle states that before a country or company purchases carbon credit, internal abetment should be in the forefront. A flexible mechanism was developed to measure permanent emission outside the capped level to determine the carbon credits.CDM methodology process is essential to determine whether carbon credits have efficiently led to the reduction of emission GHG.This process involves the submission of concepts of emission to a team of experts and CDM methodology panel through a Designated Operational Entity (DOE) who will decide the reduction of emission.

The sum of GHG discharged by an organization or individual is known as carbon footprint expressed in carbon dioxide tons. Carbon footprint is also defined as the sum of carbon dioxide in combination with methane emitted by a specific population or doings (Wright, Kemp & Williams, 2018).

Individuals and major manufacturing companies have greatly contributed to the carbon footprint basically through the burning of fossil fuels to generate energy. Arguably, mobility and consumption of manufactured goods are the biggest contributors to the emission of GHG thereby a large carbon footprint value. The mobility of individuals either through driving, flying or public transit contributes carbon footprints and accounts greatly to 23% of carbon dioxide emissions worldwide. Asian countries lead the pack with a rate of carbon dioxide emission from motor vehicles and may attain six to eightfold increases in carbon dioxide emission by 2030.An individual in households also accounts for an incredible 30% of all carbon dioxide worldwide. Individuals in a household vary widely based on the amount of carbon dioxide emitted through usage of various products. The total carbon dioxide emitted by a household depends on the expenditure and incomes of individuals in the household. A high income coupled with enormous expenditure would translate to a higher amount of Carbon dioxide emitted ("Methodological Aspects of Carbon Footprint," 2015,). Controlling an individual carbon footprint has been proved to be an uphill task. This is entirely due to dynamism of individual's needs based on their income and a lack of methodology to calculate the local emission of GHG by an individual or household. This significantly hinders the implementation of policies such as carbon taxes aimed at lowering individual's impact on the climate through carbon footprints.

Nonetheless, companies differ significantly on carbon footprints based method of energy generation. About the Vattenfall study (1999), companies using coal, oil and natural gases as their primary sources of energy have a higher carbon footprint as compared to companies using wind, hydroelectric and nuclear power which have close to nil carbon footprints (Warner, Ethan & Garvin, 2012).Apart from the means of energy generation, companies also differ significantly on the number of carbon footprints based on the product they manufacture. In a study carried out, cement production contributed significantly to carbon footprints indirectly through the burning of fossil fuels in the kiln to heat limestone to produce carbon dioxide through a process the calculations. This represents 40% of total carbon dioxide emitted by a factory, plant. This differs significantly in companies that utilize renewable energy such as solar and wind power to manufacture their products.

Carbon Offset refers to a reduction in the emission of GHG with the aim of compensating for discharge by other individuals or companies elsewhere. Carbon offset is estimated in metric tons of carbon dioxide-comparable. Carbon credits can efficiently be utilized to offset carbon emission in numerous ways. An individual or a company who may have difficulties in offsetting carbon emission can purchase carbon credits from business dealing with renewable sources of energy, forest conservation and agro forestry projects worldwide. By so doing, companies with high carbon footprints will be mitigating carbon emissions through utilization of energy efficient ventures to reinstate fossil fuel. Carbon Dioxide in the air can be reduced through buying of carbon credits which can be generated through various projects such solar, wind, biomass to replace carbon footprints from companies using fossil fuel as the primary source of energy.

Carbon credit surplus can be traded on carbon markets worldwide under the trade and cap schemes. This is done through the establishment of a particular legal limit on carbon footprints over a known period often referred to as a cap. Companies are then issued with carbon permits or emissions allowances that allow them to emit an agreed amount of GHG to the atmosphere in the form of pollution. Trade, therefore, occurs when industries that do not attain the cap buys carbon permits from other companies that may have a surplus (Isah, 2013).Carbon credit surplus is sold on various platforms such as the Chicago Climate Exchange. A company can be able to emit one metric ton of GHG to the atmosphere on purchasing a carbon credit from these platforms. An offset aggregator acts as a broker in the carbon market and enables individuals, or small industries buy or sell their carbon credit surplus by connecting them to the CCX. To trade carbon credit surplus efficiently, an individual must meet CCX criteria that require verification of business or land ownership who will later measure, standardize and document carbon footprints to establish the amount of carbon credit surplus an individual is eligible to sell.

References

Bohringer, C., & Loschel, A. (2002). Assessing the costs of compliance: the Kyoto Protocol. European Environment, 12(1), 1-16. http://dx.doi.org/10.1002/eet.279

EU agrees to 20% CO2 cut. (2007). Physics Today. http://dx.doi.org/10.1063/pt.5.020926

Flues, F. (2011). The political economy of the clean development mechanism: Econometric evidence on executive board decisions, project supply, and political support for carbon credit imports.

Isah, Y. (2013). Green House Gases, Climate Change and Enviromental Conservation for Sustainable Development. Academic Journal Of Interdisciplinary Studies. http://dx.doi.org/10.5901/ajis.2013.v2n6p9

Methodological Aspects of Carbon Footprint. (2015). The Carbon Footprint Handbook, 1-2. doi:10.1201/b18929-2

Warner, E., Zhang, Y., Inman, D., & Heath, G. (2013). Challenges in the estimation of greenhouse gas emissions from biofuel-induced global land-use change. Biofuels, Bioproducts and Biorefining, 8(1), 114-125. doi:10.1002/bbb.1434

Wright, L. A., Coello, J., Kemp, S., & Williams, I. (2011). Carbon footprinting for climate change management in cities. Carbon Management, 2(1), 49-60. doi:10.4155/cmt.10.41