Carbon credit

The industries like power, cement, steel, textile, fertilizer are major sources of greenhouse gas emissions. The greenhouse gases include carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, etc. All these gases trap infrared energy and affect climate. The concept of carbon credit came into existence with increasing awareness about controlling emissions. Thus, policies were made to provide the real or implicit price of carbon as an incentive for producers and consumers to invest in low-greenhouse gas-emitting products, methods, and systems.


Global warming is today’s primary concern of all biologists and environmentalists. They are finding ways and methods to reduce the consumption of hazardous, non-recyclable energy sources. A carbon credit is nothing but a method to attempt lowering the use of carbon. In 1997’s United Nations Framework Convention on Climate Change held in Kyoto, Japan, the world’s nations agreed carbon credits were a good way of reducing the emission of CO2 and other greenhouse gases. In 2001, in Germany, 191 countries approved this protocol. The idea of a cap-and-trade system and a carbon credits market were brought into the world for the first time.


A carbon credit is a certificate or permission which allows any company to emit one tonne of carbon dioxide or an equivalent amount of different greenhouse gas. This market aims to guide industries and commercial processes towards low emission or less carbon-intensive ways. As this greenhouse gas mitigation technique earns credits, this is further used to finance carbon reduction scheme all over the world. Voluntary emissions reduction (VER) and Certified emissions reduction (CER) are two types of carbon credits. In the case of VER, carbon offset is exchanged over the counter for credits whereas CER emission units are created through a regulatory framework.


In a cap-and-trade system, there is a cap on the total carbon GHG emissions levels. It works as a system where caps are increasingly reduced every year and the companies with low emissions can sell their allowances, they didn’t spend to others who spend more than they were allowed to. This creates the supply and demand of the carbon market. carbon taxes set a direct price on carbon as they establish a tax rate on GHG emissions. Opposite to the cap-and-trade system, with carbon taxes, the emission reduction outcome is not pre-defined. Furthermore, there are also other indirect ways to price carbon such as taxing fossil fuels or removing fossil fuel subsidies.


Indian industries are also a part of the booming carbon market. India is a preferred location for carbon credit buyers. Carbon is now gets traded in the multi-commodity market of India. Jindal Vijaynagar Steel, Powerguda in Andhra Pradesh, Handia Forest in Madhya Pradesh are some examples of carbon trading in India. Though India active developing country of carbon trading, there is a need for proper strategy and policy for carbon trading in the market. Without a radical change in our actions, we cannot save our planet. So, replacement of fuel emission with renewable sources of energy is the way forward!!



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