Carbon credits

Definition

Carbon credits are permits that allow the holder to emit a specific amount of carbon dioxide or other greenhouse gases. One carbon credit is equivalent to one ton of CO2 emissions. This system is designed to reduce greenhouse gas emissions and combat climate change by providing economic incentives for companies and countries to lower their carbon footprint, while also facilitating compliance with international agreements aimed at environmental conservation.

5 Must Know Facts For Your Next Test

1. The carbon credit system aims to create a financial incentive for reducing greenhouse gas emissions by putting a price on carbon.
2. Countries that exceed their emission reduction targets can sell their excess carbon credits to countries that are struggling to meet their goals.
3. The concept of carbon credits is often linked to international agreements like the Kyoto Protocol, which established binding obligations for developed nations to reduce emissions.
4. Carbon credits can be generated through projects that reduce or sequester greenhouse gas emissions, such as reforestation or renewable energy projects.
5. Critics argue that the carbon credit system may allow companies to continue polluting while merely purchasing credits instead of making genuine reductions in emissions.

Review Questions

• How do carbon credits function within the framework of international agreements aimed at reducing greenhouse gas emissions?
  • Carbon credits play a crucial role in international agreements by allowing countries to trade emission allowances. This flexibility helps countries meet their reduction targets more cost-effectively. For instance, under agreements like the Kyoto Protocol, developed nations can purchase credits from developing nations that have lower emissions. This creates a global market for carbon credits, incentivizing emission reductions while promoting sustainable development.
• Evaluate the effectiveness of carbon credits in achieving meaningful reductions in greenhouse gas emissions compared to direct regulatory approaches.
  • The effectiveness of carbon credits is debated among environmentalists and economists. While they provide financial incentives for companies to reduce emissions, some argue they can lead to loopholes where businesses might rely on purchasing credits rather than investing in actual emission reduction technologies. In contrast, direct regulatory approaches impose strict limits on emissions but may lack flexibility. A balanced approach could combine both strategies for more effective climate action.
• Analyze the potential social and environmental implications of a global carbon credit market and its influence on conservation efforts.
  • A global carbon credit market has significant social and environmental implications. It can mobilize funding for conservation projects in developing countries, helping preserve biodiversity through initiatives like reforestation. However, there is a risk that commodifying nature may lead to exploitation or neglect of local communities' rights. Additionally, if not regulated properly, the market could enable wealthy nations or corporations to bypass meaningful change while continuing harmful practices elsewhere, undermining broader conservation goals.

Related terms

Cap-and-Trade: A market-based system where a limit (cap) is set on emissions, and companies can buy and sell allowances to emit CO2, encouraging reductions where they are most cost-effective.

Greenhouse Gases: Gases that trap heat in the atmosphere, including CO2, methane, and nitrous oxide, contributing to global warming and climate change.

Emissions Trading System (ETS): A market-based approach used in various regions where companies can trade carbon credits to meet their emissions reduction targets.