This article explains in brief, the critical issues of carbon emissions and the rising importance of the carbon credits market.
Our climate is changing. The Earth’s climate has, in fact, warmed by 1.1 to 1.6 degrees Fahrenheit since the industrial revolution. People look at this and say: Oh, that is not very much. In fact, it is very much, and it changes the dynamic. It impacts species. It kills some. It diminishes the carbon sink of the ocean. It does a number of things. ~ Diane Feinstein
Feinstein’s views point to a larger picture, which is a result of an amalgam of smaller everyday things we use to emit carbon in the atmosphere. The average carbon emission of an American is about 19 to 20 tons of carbon dioxide, which is much larger compared to other countries. The rise of carbon dioxide levels in the atmosphere have prompted many serious complications to occur in the entire world.
So, it has become imperative to minimize the emission levels. The introduction of the emissions trading system over the years has not just become a powerful policy instrument on the international diplomatic platform, but also helps us to reduce these emissions. Clarity, compliance, efficiency, and price signal, are the main pillars on which the emissions system stand. Carbon credits are the currency-equivalent in carbon trading.
What are Carbon Credits?
The unit of carbon credit is one metric ton of carbon dioxide. It is primarily used as an offset to achieve carbon neutrality. For instance, consider that you have a business, which has a very low percentage of carbon emissions as compared to other similar businesses. What you can do is, you can help the other business to offset their carbon emission by selling them the carbon credits. Suppose you sell 5 units to that business, it means that you are helping them to offset their 5 tons of extra carbon emission. The price fluctuates, given the market dynamics of demand and supply, globally varying pricing and currency structure, etc. One unit costs around $15 to $40.
How to Buy and Sell Carbon Credits
Nowadays, it has become an extremely easy process, given the number of providers, like Carbonfund, The Climate Trust, and TerraPass, selling them online. These providers sell you the carbon credits and use the money generated thereby, to allocate to various projects supported by the provider, like solar power, geothermal power, wind power projects, biomass combustion, forestation, etc. You are just required to calculate your carbon footprint, through simple calculations provided on the same website using the data like your electricity or fuel usage. Then, you will have to buy them using your credit card or PayPal account, to help offset the carbon you emit.
First, you need to determine whether your business can help in offsetting the carbon emission of other businesses. You need to have very low carbon emissions for the same output produced, in comparison to others. Then, you have to approach the Chicago Climate Exchange (CCX) to get the membership to be eligible for selling. This carbon exchange functions similar to a normal stock exchange, where according to the market fluctuations, carbon credits can be bought and sold.
Your business is audited and monitored after a certain interval of time, to check for the authenticity of your claim of carbon offsetting, to the number of units you offer for purchase on the carbon stock exchange. There is a CCX electronic trading platform, through which the trades are conducted. You can trade with other businesses through CCX. It is advised that you trade the credits with large companies, so that you can get a good price.
Now, many of you may be wondering whether you can sell carbon credits. The answer is YES, if you are a farmer or a large land-holder. The government has a scheme to help you in this regard. The cropland must be farmed with no-till or conservation tillage practices, to qualify for this, as not tilling up the land each season means the carbon dioxide in the soil is not released into the atmosphere.
Also, according to recent news, under a draft legislation for the government’s carbon farming initiative (CFI), farmers, forest growers, and land-holders, will be able to earn credits through planting trees, improving the agricultural practices such as Savannah fire management, reducing grazing levels and reducing the fertilizer emissions. They can sell them locally and internationally, at the prevailing price on the climate exchange, for activities that increase carbon sequestration.
As for other individuals, even if there are no particular provisions for selling carbon credits, you can certainly make a difference to the environment by ensuring that you do not emit more carbon and use those products which cause lesser carbon emission..