Carbon trading also known as carbon emissions trading is an innovative form of commodity trading that specifically targets the emission of green house gasses or carbon dioxide (calculated in tonnes of carbon dioxide equivalent or tCO2e) and it currently constitutes the bulk of carbon emissions trading markets worldwide. Read more
A carbon offset is a reduction in emissions of carbon dioxide or greenhouse gases made in order to compensate for or to offset an emission made elsewhere. Carbon offsets are measured in metric tons of carbon dioxide-equivalent (CO2e) and may represent six primary categories of greenhouse gases.
The categories include: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), per fluorocarbons (PFCs), hydroflourocarbons (HFCs), and sulphur hexafluoride (SF6). One carbon offset represents the reduction of one metric ton of carbon dioxide or its equivalent in other greenhouse gases.
The carbon trade came about in response to the Kyoto Protocol. Signed in Kyoto, Japan, by some 180 countries in December 1997, the Kyoto Protocol calls for the 38 industrialized countries worldwide to reduce their greenhouse gas emissions between the years 2008 to 2012 to levels that are 5.2% lower than those of 1990.
Carbon is an element stored in fossil fuels such as coal and oil. When these fuels are burned, carbon dioxide is released and acts as what we term a "greenhouse gas".
The idea behind the concept of carbon trading is quite similar to the trading of securities or commodities in a marketplace. Carbon would be given an economic value, allowing people, companies or nations to trade it.
If a nation bought carbon, it would be buying the rights to burn it, and a nation selling carbon would be giving up its rights to burn it. The value of the carbon would be based on the ability of the country owning the carbon to store it or to prevent it from being released into the atmosphere. (The better you are at storing it, the more you can charge for it.)
Thus, a market would be created to facilitate the buying and selling of the rights to emit greenhouse gases. The industrialized nations for which reducing emissions is a daunting task could buy the emission rights from another nation whose industries do not produce as much of these gases. The market for carbon is possible because the goal of the Kyoto Protocol is to reduce emissions as a collective.
On the one hand, carbon trading seems like a win-win situation: greenhouse gas emissions may be reduced while some countries reap economic benefit. On the other hand, critics of the idea suspect that some countries will exploit the trading system and the consequences will be negative. While carbon trading may have its merits, debate over this type of market is inevitable, since it involves finding a compromise between profit, equality and ecological concerns.
Carbon Offsets are a neat little way of financially incentivizing projects that generate emission reductions. A carbon offset is created when emission reductions from a project have been monitored, measured and then bundled into units of single metric tonnes of Carbon Dioxide equivalent. These carbon offsets can be used to offset the carbon emissions of people and companies. It may seem a bit complicated, but it's not. It's really just a great idea that allows people to play a meaningful role in the fight against climate change.
There are two major markets for carbon offsets. In the larger, compliance market, companies, governments, or other entities buy carbon offsets in order to comply with caps on the total amount of carbon dioxide they are allowed to emit. This market exists in order to achieve compliance with obligations of Annex 1 Parties under the Kyoto Protocol, and of liable entities under the EU Emissions Trading Scheme. In 2006, about $5.5 billion of carbon offsets were purchased in the compliance market, representing about 1.6 billion metric tons of CO2e reductions.
In the much smaller, voluntary market, individuals, companies, or governments purchase carbon offsets to mitigate their own greenhouse gas emissions from transportation, electricity use, and other sources.
For example, an individual might purchase carbon offsets to compensate for the greenhouse gas emissions caused by personal air travel. Many companies offer carbon offsets as an up-sell during the sales process so that customers can mitigate the emissions related with their product or service purchase (such as offsetting emissions related to a vacation flight, car rental, hotel stay, consumer good, etc.). In 2008, about $705 million of carbon offsets were purchased in the voluntary market, representing about 123.4 million metric tons of CO2e reductions.
Offsets are typically achieved through financial support of projects that reduce the emission of greenhouse gases in the short- or long-term. The most common project type is renewable energy, such as wind farms, biomass energy, or hydroelectric dams. Others include energy efficiency projects, the destruction of industrial pollutants or agricultural by-products, destruction of landfill methane, and forestry projects. Some of the most popular carbon offset projects from a corporate perspective are energy efficiency and wind turbine projects.
Carbon offsetting has gained some appeal and momentum mainly among consumers in western countries who have become aware and concerned about the potentially negative environmental effects of energy-intensive lifestyles and economies. The Kyoto Protocol has sanctioned offsets as a way for governments and private companies to earn carbon credits which can be traded on a marketplace.
The protocol established the Clean Development Mechanism (CDM), which validates and measures projects to ensure they produce authentic benefits and are genuinely "additional" activities that would not otherwise have been undertaken. Organizations that are unable to meet their emissions quota can offset their emissions by buying CDM-approved Certified Emissions Reductions.
Offsets may be cheaper or more convenient alternatives to reducing one's own fossil-fuel consumption. However, some critics object to carbon offsets, and question the benefits of certain types of offsets.
Offsets are viewed as an important policy tool to maintain stable economies. One of the hidden dangers of climate change policy is unequal prices of carbon in the economy, which can cause economic collateral damage if production flows to regions or industries that have a lower price of carbon - unless carbon can be purchased from that area, which offsets effectively permit, equalizing the price.
A Carbon Credit is a generic term given to any tradable certificate or permit representing the right to emit one tonne of carbon dioxide or the mass of another greenhouse gas with a carbon dioxide equivalent (tCO2e) equivalent to one tonne of carbon dioxide.
Carbon credits and carbon markets are a component of national and international efforts and attempts to mitigate, stop or reduce the growth in concentrations of greenhouse gases (GHGs) and carbon oxide emissions.
One carbon credit is equal to one metric tonne of carbon dioxide, or in some markets, carbon dioxide equivalent gases. Carbon trading is an application of an emissions trading approach. Greenhouse gas emissions are capped and then markets are used to allocate the emissions among the group of regulated sources.
The major goal of all these joint efforts is to allow market mechanisms to drive industrial and commercial processes in the direction of low emissions or less carbon intensive approaches than those used when there is no cost to emitting carbon dioxide and other GHGs into the atmosphere.
Since GHG mitigation and carbon reduction projects and activities generate credits, this approach can be used to finance carbon reduction schemes between trading partners, organizations and individuals all over the world.
There are several companies, organizations and individuals worldwide who sell the carbon credits they have realised to commercial and individual customers who are interested in lowering their carbon footprints on a voluntary basis.
These set of people are known as carbon off-setters. They purchase the credits from an investment fund or a carbon development company that has aggregated the credits from individual projects.
Buyers and sellers can also use an exchange platform to trade, such as the Carbon Trade Exchange, which is like a stock exchange for carbon credits. The quality of these credits is based in part on the validation process and sophistication of the fund or development company that acted as the sponsor to the carbon project. This is reflected in their price; voluntary units typically have less value than the units sold through the rigorously validated Clean Development Mechanism.
These processes are quite difficult, very strenuous and often take time. If you try to them on your own, you will find out that they are usually very cumbersome or overwhelming which is why we created this platform - the Climate Credit Network. As a member of this network, you can participate in the booming carbon trading market and get rewarded for your efforts in promoting clean energy.
Our ultimate goal is to recruit members who would be involved in our green products and clean development mechanisms projects that would make us earn these carbon credits which we would in turn sell to Carbon Off-setters all over the world and later share amongst our members that helped with the process.
Want to earn carbon credits? Switch to Solar - Join us today.