Carbon credits
Carbon credits are freely tradable permits that organisations offset against their carbon dioxide emissions. The idea is rooted in the principles of environmental economics and credits have the function of turning something which is free to an organisation (the consequences of pollution) into something that they have to pay for like a raw material (the permit allowing them to emit carbon dioxide). Companies that can reduce their emissions cheaply will do so, selling their carbon credits to those who find it cheaper to buy credits and continue their levels of emissions than to reduce emissions. The number of credits in circulation will be finite, and can be reduced over time to lead to a reduction in total emissions.
There are many examples of schemes around the world using this principle: the Kyoto Protocol does it on a country to country basis and the European Union Emissions Trading Scheme (ETS) and the New South Wales Greenhouse Gas Abatement Scheme are the largest examples of industry based schemes. Currently a group of north-eastern US states are investigating a collective carbon trading framework: the Regional Greenhouse Gas Initiative.
At present the ETS covers heavy industries such as electricity generation and cement manufacture. The ETS does not yet permit companies to off-set their emissions with credits arising from the planting of new forest sinks, but the GGAS does include sinks and it is expected that the RGGI will include them. Negotiations are underway to include sinks credits in the ETS in the future.
The Kyoto Protocol does allow developed countries to 'buy in' carbon credits from developing nations to meet their emissions reduction targets, and forestry projects in the least developed world are awarded internationally tradeable credits on this basis.
The credits arising from the schemes mentioned above could be said to be statutory credits - arising from legislation. There is also a strong global interest in voluntary credits - the kind produced by ForestCarbon projects. Voluntary credits, although free of regulatory requirements, should still aspire to regulatory standards in order for investors to be reassured that they are making a real contribution to climate change mitigation. Companies buying ForestCarbon voluntary credits are taking action that is making a real contribution to solving the crisis that is global warming.
There are many examples of schemes around the world using this principle: the Kyoto Protocol does it on a country to country basis and the European Union Emissions Trading Scheme (ETS) and the New South Wales Greenhouse Gas Abatement Scheme are the largest examples of industry based schemes. Currently a group of north-eastern US states are investigating a collective carbon trading framework: the Regional Greenhouse Gas Initiative.
At present the ETS covers heavy industries such as electricity generation and cement manufacture. The ETS does not yet permit companies to off-set their emissions with credits arising from the planting of new forest sinks, but the GGAS does include sinks and it is expected that the RGGI will include them. Negotiations are underway to include sinks credits in the ETS in the future.
The Kyoto Protocol does allow developed countries to 'buy in' carbon credits from developing nations to meet their emissions reduction targets, and forestry projects in the least developed world are awarded internationally tradeable credits on this basis.
The credits arising from the schemes mentioned above could be said to be statutory credits - arising from legislation. There is also a strong global interest in voluntary credits - the kind produced by ForestCarbon projects. Voluntary credits, although free of regulatory requirements, should still aspire to regulatory standards in order for investors to be reassured that they are making a real contribution to climate change mitigation. Companies buying ForestCarbon voluntary credits are taking action that is making a real contribution to solving the crisis that is global warming.
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