Understanding the Fundamentals of Carbon Credits

Carbon Credits

One of the things that a person may hear from time-to-time in the field of industrial production, greenhouse farming, and farming, in general, is carbon credits. Carbon credits are an essential part of environmental conservation and preservation of the ozone layer in preventing global warming. Companies are limited on the amount of carbon dioxide and greenhouse gasses that they are allowed to emit. Carbon credits is a policy that helps companies to reduce their incentive to emit CO2 and other harmful gasses.

Emission of Carbon Dioxide Gases and Other Greenhouse Gases

Companies are well-known for emitting harmful gases into the atmosphere. A lot of pollution can be credited to companies, especially those with industrial affiliations. In their production, companies get waste materials. One of the most common waste materials comes in the form of gas and is carbon dioxide. Apart from carbon dioxide, there is the emission of greenhouse gases which is equally as harmful. Since these waste materials cannot be reused or recycled economically, companies find it more reasonable to let it all out to the atmosphere. However, as years passed and the industrialization period became more firm, it was established that these emissions are harmful to the environment. They are a significant cause of global warming.

A Law to Help Protect the Environment

Telling companies to simply avoid emitting harmful gases to the environment with no incentive doesn’t work well. It is common knowledge that several companies went against the threat of global warming and kept releasing harmful gases into the air. The policy of carbon credits came in and changed everything.

Kyoto Protocol

The United Nations Kyoto Protocol of 1997 is the agreement credited for the start of carbon credits. The United Nations’ Intergovernmental Panel developed it on Climate Change (IPCC). The protocol was to help reduce carbon emission worldwide in response to the growing global warming issue. Countries in the world were divided into developing countries and industrialized countries. Each country was given a limit on the number of hydrocarbons that could be released into the atmosphere. One carbon credit issues a company the allowance to emit one ton of carbon. If a country or an industry doesn’t reach its carbon credit limits in a year, it is allowed to sell its credits to another country that is struggling to stay within its boundaries.

The United States Clean Air Act

The United States Clean Air Act of 1990 was one of the first cap limitations on the world’s emissions. It was credited as the first program to allow cap and trade on emissions, especially sulfur dioxide, known for causing acid rains. The United States Clean Air Act was pivotal in developing carbon credits and proved to be a system that can work for a better environment.

Buying Carbon Credits

Buying carbon credits depend on the economy that one is in. Each country is allocated a different number of carbon credits depending on their industrialization levels. Within the country, carbon credits are given to companies. Companies that have excess carbon credits can then trade it with other companies. The trade can be costly to any company that cannot stay within its limits, having to buy carbon credits from others. The trade of carbon credits has led to the infamous cap-and-trade, which is acceptable in some states while others disagree with the whole concept.

Importance of Carbon Credits

One thing that will keep bothering people is whether or not the concept of carbon credits works. Some people think that putting a cap doesn’t help reduce the number of emissions a great deal. However, it does. Necessity is the mother of invention, and companies have been forced to find better ways of removing carbon to reduce the costs brought in by carbon credits. There are Nori markets that work on carbon removal, which is later sent to the ground. The cap has dramatically helped in the reduction of greenhouse gases released into the atmosphere. This reduces global warming and ozone layer depletion. The concept of carbon credits isn’t perfect yet, and revisions will always be made, the latest one being in 2012 in the Paris Climate Agreement.

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