Trade Carbon Credits Start
Trade carbon credits is a system of trading greenhouse gas emissions. It is designed to make emissions more manageable, thereby reducing the cost of meeting emissions targets. The concept was first introduced in the 1997 Kyoto Protocol. Carbon markets have since then emerged around the world. They have become a way for companies to offset their CO2 emissions.
There are two types of carbon trading markets. First is the regulatory market, which is based on a mandate. A cap on emissions is set by regulators. If a company exceeds its limit, it must buy pollution permits from other companies. This is also known as a cap-and-trade scheme.
Another type of market is the voluntary one. These credits are supplied by governments and private individuals. Generally, they are used for a variety of purposes, such as planting trees. For instance, the Nature Conservancy sells carbon credits for projects that protect protected areas.
When Did Trade Carbon Credits Start?
Both types of carbon markets work differently. Companies can choose to buy or sell these credits. Depending on the regulations of the country, they can either be tradable or non-tradable. Some states operate their own cap-and-trade programs, while others have no such program.
Most of the trading has been in voluntary markets. However, the emergence of new regional markets has created a surge of investment. Tech companies have led the recent upsurge in carbon credits purchases. One of the most recent deals was struck by TVA. At $250 per ton, the company purchased the first emissions trading deal in the United States.
In the past five years, the size of the voluntary carbon market has doubled. Although the market is still in its infancy, it has already reached a size that allows it to provide significant investment in climate change mitigation. Among the key participants in the voluntary market are Microsoft, which bought 1.3 million tons of carbon credits from 26 projects.
Other companies also purchase carbon credits. Royal Dutch Shell invested in forest projects in Indonesia, Peru, and Ghana. But, while these companies claim that they are “carbon neutral,” they have not been able to reduce their emissions enough to do so.
Critics contend that many of the credits on the market are fraudulent. According to Trove CEO Guy Turner, more than 60 percent of the credits on the market are questionable projects. Consequently, good carbon saving schemes could be lost in an avalanche of dodgy credits.
The White House is urging the industry to reform the carbon market. Among the goals of the taskforce on scaling voluntary carbon markets is to “clean up” the carbon market. This would be done by introducing new markets for cleaner carbon.
The United Nations recently designated the Taskforce on Scaling Voluntary Carbon Markets as its special envoy on climate finance. As part of the initiative, the group announced plans to launch a cleaned-up carbon market in London. The market is expected to trade up to $100 million a year.
Many countries are currently considering implementing cap-and-trade programs. Countries with the most potential for growth include Denmark, Germany, and China.