carbon credit?

Answer 1

Emissions trading (or cap and trade) is an administrative approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants. In such a plan, a central authority (usually a government agency) sets a limit or cap on the amount of a pollutant that can be emitted. Companies or other groups that emit the pollutant are given credits or allowances which represent the right to emit a specific amount. The total amount of credits cannot exceed the cap, limiting total emissions to that level. Companies that pollute beyond their allowances must buy credits from those who pollute less than their allowances. This transfer is referred to as a trade. In effect, the buyer is being fined for polluting, while the seller is being rewarded for having reduced emissions. The more firms that need to buy credits, the higher the price of credits becomes -- which makes reducing emissions cost-effective in comparison.

The overall goal of an emissions trading plan is to reduce pollution. In some cases, the cap may be lowered over time. In other systems a portion of all traded credits must be retired, causing a net reduction in emissions each time a trade occurs. In many cap and trade systems, organizations which do not pollute may also buy credits. Environmental groups that purchase and retire pollution credits reduce emissions and raise the price of the remaining credits as per the law of demand. Corporations can also retire pollution credits by donating them to a nonprofit and then be eligible for a tax deduction.

Because emissions trading uses free markets to determine how to deal with the problem of pollution, it is often touted as an example of effective free market environmentalism. While the cap is usually set by a political process, individual companies are free to choose how or if they will reduce their emissions. In theory, firms will choose the least-cost way to comply with the pollution regulation, creating incentives that reduce the cost of achieving a pollution reduction goal.

Emissions trading markets can be easier to enforce because the government overseeing the market does not need to regulate specific practices of each pollution source. However, monitoring (or estimating) of actual emissions is still required, which can be costly.

Answer 2

it means u get credit on keeping sum imp document wit the bank where u wnt to apply for crsdit

Answer 3

Hey, what exactly are carbon credits?.


Amidst growing concern and increasing awareness on the need for pollution control , the concept of carbon credit came into vogue as part of an international agreement, popularly known as the Kyoto Protocol . Carbon credits are certificates issued to countries that reduce their emission of GHG (greenhouse gases) which causes global warming.

It is estimated that 60-70% of GHG emission is through fuel combustion in industries like cement, steel, textiles and fertilisers. Some GHG gases like hydro fluorocarbons, methane and nitrous oxide are released as by-products of certain industrial process, which adversely affect the ozone layer, leading to global warming .

What is the Kyoto protocol?

Kyoto Protocol is a voluntary treaty signed by 141 countries, including the European Union, Japan and Canada for reducing GHG emission by 5.2% below 1990 levels by ’12. However, the US, which accounts for one-third of the total GHG emission, is yet to sign this treaty. The preliminary phase of the Kyoto Protocol is to start in ’07 while the second phase starts from ’08. The penalty for non-compliance in the first phase is E40 per tonne of carbon dioxide (CO2) equivalent. In the second phase, the penalty will be hiked to E100 per tonne of CO2.

How does trading in carbon credit (CC) take place ?

The concept of carbon credit trading seeks to encourage countries to reduce their GHG emissions, as it rewards those countries which meet their targets and provides financial incentives to others to do so as quickly as possible. Surplus credits (collected by overshooting the emission reduction target) can be sold in the global market. One credit is equivalent to one tonne of CO2 emission reduced. CC are available for companies engaged in developing renewable energy projects that offset the use of fossil fuels.

Developed countries have to spend nearly $300-500 for every tonne reduction in CO2, against $10-$25 to be spent by developing countries. In countries like India, GHG emission is much below the target fixed by Kyoto Protocol and so, they are excluded from reduction of GHG emission. On the contrary, they are entitled to sell surplus credits to developed countries.

It is here that trading takes place. Foreign companies who cannot fulfil the protocol norms can buy the surplus credit from companies in other countries through trading.

Thus, the stage is set for Credit Emission Reduction (CER) trade to flourish. India is considered as the largest beneficiary, claiming about 31% of the total world carbon trade through the Clean Development Mechanism (CDM), which is expected to rake in at least $5-10bn over a period of time.
Carbon credits are a tradable permit scheme. They provide an efficient way to reduce greenhouse gas emissions by giving them a monetary value. A credit gives the owner the right emit one tonne of carbon dioxide.

International treaties such as the Kyoto Protocol set quotas on the amount of greenhouse gases countries can produce. Countries, in turn, set quotas on the emissions of businesses. Businesses that are over their quotas must buy carbon credits for their excess emissions, while businesses that are below their quotas can sell their remaining credits. By allowing credits to be bought and sold, a business for which reducing its emissions would be expensive or prohibitive can pay another business to make the reduction for it. This minimizes the quota's impact on the business, while still reaching the quota.

Credits can be exchanged between businesses or bought and sold in international markets at the prevailing market price. There are currently two exchanges for carbon credits: the Chicago Climate Exchange and the European Climate Exchange.
Contents
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* 1 Background
o 1.1 How buying carbon credits attempts to reduces emissions
* 2 See also
* 3 External links

[edit] Background

Major industry sources of greenhouse gas emissions are cement, steel, textile, and fertilizer manufacturers. The main gases emitted by these industries are methane, nitrous oxide, hydroflurocarbons, etc which directly deplete the ozone layer.

The concept of carbon credits came into existence as a result of increasing awareness of the need for pollution control. It was formalized in the Kyoto Protocol, an international agreement between 141 countries. Carbon credits are certificates awarded to countries that are successful in reducing the emissions that cause global warming.

For trading purposes, one credit is considered equivalent to one tonne of CO2 emissions. Such a credit can be sold in the international market at the prevailing market price. There are two exchanges for carbon credits: the Chicago Climate Exchange and the European Climate Exchange.

The Kyoto Protocol was signed by 141 countries in 1999, with the US staying out of the agreement. Some developing countries, such as India and China, have ratified the protocol but are not required to reduce carbon emissions under the present agreement, despite their large populations. The Kyoto protocol aims to reduce greenhouse gas emissions 5.2% below 1990 levels by 2012. The first phase of the protocol begins in 2007 and the second phase in 2008. In each phase, non-compliance will invite a monetary penalty.

The Kyoto Protocol provides for three mechanisms that enable developed countries with quantified emission limitation and reduction commitments to acquire greenhouse gas reduction credits. These mechanisms are Joint Implementation (JI), Clean Development Mechanism (CDM) and International Emission Trading (IET).

Under JI, a developed country with relatively high costs of domestic greenhouse reduction would set up a project in another developed country that has a relatively low cost. Under CDM, a developed country can take up a greenhouse gas reduction project activity in a developing country where the cost of greenhouse gas reduction project activities is usually much lower. The developed country would be given credits for meeting its emission reduction targets, while the developing country would receive the capital and clean technology to implement the project. Under IET, countries can trade in the international carbon credit market. Countries with surplus credits can sell them to countries with quantified emission limitation and reduction commitments under the Kyoto Protocol.

[edit] How buying carbon credits attempts to reduces emissions

Carbon credits create a market for reducing greenhouse emissions by giving a monetary value to the cost of polluting the air. This means that carbon becomes a cost of business and is seen like other inputs such as raw materials or labor.

By way of example, assume a factory produces 100,000 tonnes of greenhouse emissions in a year. The government then enacts a law that limits the maximum emissions a business can have. So the factory is given a quota of say 80,000 tonnes. The factory either reduces its emissions to 80,000 tonnes or is required to purchase carbon credits to offset the excess.

A business would buy the carbon credits on an open market from organisations that have been approved as being able to sell legitimate carbon credits. One seller might be a company that will plant so many trees for every carbon credit you buy from them. So, for this factory it might pollute a tonne, but is essentially now paying another group to go out and plant trees which will say draw a tonne of carbon dioxide from the atmosphere.

As emission levels are predicted to keep rising, over time it is envisaged, that the number of companies wanting/needing to buy more credits will increase hence pushing the market price up, and hence encouraging more groups to undertake environmentally friendly activities which create for them carbon credits to sell. Another model is that companies which use below their quota can sell their excess as 'carbon credits' also, the possibilities are endless hence making it a open market.

It is suggested that initially the quotas should be liberal, which would make the demand for carbon credits, and their resulting price, low so that business find it easy to transition towards paying for credits. Then over time, the quota of emissions a government sets (based on, say, international agreements) will gradually be reduced until the target level of emissions is reached.