Understanding Carbon Credits in the Context of the Paris Agreement
By Dr. Asangba Tzudir
The Paris Agreement is fundamentally built around the concept of Carbon Credits, also known as Carbon allowances. These credits permit the emission of a certain amount of carbon dioxide or other greenhouse gases (GHGs). One credit allows for the emission of one ton of carbon dioxide or its equivalent in other GHGs. This system aims to incentivize the reduction of GHG emissions.
Companies that exceed their emission limits must buy additional Carbon Credits. This purchasing dynamic is part of a "cap-and-trade" program, which was previously successful in reducing sulfur pollution in the 1990s. During the Glasgow COP26 climate summit in November 2021, negotiators agreed to establish a global carbon credit trading market. The UN allocates a certain number of credits to countries, who then issue, monitor, and report on their carbon credit status annually, while governments cap company emissions before requiring credit purchases.
Proponents of cap-and-trade argue it promotes investment in cleaner technologies, while detractors claim it merely creates surplus credits that can be traded for profit. Carbon credits can only be traded by businesses and governments, with the buying process typically involving companies purchasing credits from governments, thereby gaining permission to emit CO2.
Alternatively, carbon offsets are credits available in the voluntary market, often used to fund green projects, and are accessible to anyone. Landowners engaged in reforestation or conservation can also sell these credits.
Companies under market pressure to achieve "net-zero carbon emission" targets often purchase carbon offsets to combat the climate crisis. While complete elimination of emissions is unfeasible for many, activities like tree-planting are viable measures.
Carbon credit prices are geographically varied, influenced by local regulations. For example, Bloomberg NEF predicts California’s carbon prices will average $42 per metric ton in 2024, compared to Europe’s $76 per ton. Ultimately, Carbon Credits serve as a dual mechanism for reducing and counterbalancing GHG emissions.
(Dr. Asangba Tzudir writes guest editorials for the Morung Express. Comments can be mailed to asangtz@gmail.com)
Original Story https://www.morungexpress.com/carbon-credits
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