Global
Warming is the biggest threat to humanity. Melting glaciers, freak storms,
Australian bushfire, rising temperature shows how quickly and drastically green
house emissions (GHG) are changing our planet. Besides the rising price of
energy, compel people to reduce the consumption and lower their personal shares
of global emissions. But there is a developing framework of economic solutions
to the problem. The world leaders have accepted carbon trading over its
rival, carbon tax as a novel way to reduce the GHG emissions.
Carbon
trading often referred as emissions trading. It is a market based tool to limit
the greenhouse gas emissions. The carbon market mainly trades emissions under cap-and-trade
schemes or with credits that pay for or offset GHG reductions. Under
cap-and-trade schemes the governing body fixes a cap on allowable emissions and
then distributes or auctions off emissions allowances that total the cap. Member
firms that do not have enough allowances to cover their emissions must either
make reductions or buy another firm’s spare. Members with extra allowances can
sell them or bank them for future use. A successful
cap-and-trade scheme relies on a strict but feasible cap that decreases
emissions over time. A too high or low cap will not serve the purpose. The
governing body stabilizes the high price of allowances by releasing additional
credits. The price of allowances is usually a function of supply and
demand.
Credits are similar to carbon offsets and they are used in conjunction
with cap-and-trade schemes. Firms that wishes to reduce below target may fund
pre approved emissions reduction projects at other sites and also in other
countries. Following points to be noted in this context:
•
A carbon market allows countries or industries
to earn carbon credits for emission reductions they make in excess of what are
required of them.
•
These credits can be traded to the highest
bidder in exchange for money.
•
The buyers of carbon credits can show the
emission reductions as their own and use them to meet their own emission
reduction targets.
•
A carbon market already existed under the 1997
Kyoto Protocol but several countries walked out of the Kyoto Protocol and thus
the demand for carbon credits had waned.
•
As a result, developing countries like India,
China and Brazil had accumulated huge amounts of carbon credits. These credits
are now in danger of getting redundant.
Thus carbon market can be a way for the reduction
of green house emission to the atmosphere. It is thereby a feasible method for
the protection of environment. But a plan is as good as its implementation.
Therefore this should be taken into consideration by the environmentalist,
scientist and other such person working for the protection and preservation of
environment.
Dr. Sumitra Mohanty,
Coordinator, Research Documentation and
Communication, PECUC
