Understanding the Concept Of Selling And Buying Carbon Credits
Buying and selling carbon credits is catching on fast in Europe, US, Australia and other parts of the world. Carbon credits are the equivalent of 1 ton of carbon dioxide emitted. These credits have a value set on them by a regulatory authority. The owner of the carbon offset can emit 1 ton of carbon dioxide gas.
Similarity To Commodity Trading
The credits can be bought or sold like any other commodity. The owner, if they do not need the offset, can sell it to someone who does need it. A farmer in a rural area, who does not have heavy carbon footprints, can sell his credit to a factory that emits much greenhouse gases. In case the owner is not interested in selling carbon credits, she can donate them to groups working for conservation of the environment. Even brokers can help in buying carbon credits or selling carbon credits
Who Buys Your Credits?
The buyers are mostly individuals and organizations concerned about their emission levels. In many cases, industries resort to buying carbon credits to compensate for the greenhouse gases their factories generate. The government sets a ceiling on the emissions beyond which they need to purchase these offsets. The most common buyers of carbon credits are MNCs, huge corporations and power services companies. While government regulation cannot control all pollution, many companies go for buying carbon credits to keep pollution under control and to enhance their public image. In either case, it helps to protect the environment.
Who Sells Carbon Credits?
People who possess some area of land are the major sellers. Farmers form a chunk of this group. If they agree to convert some land into natural forest, or adopt environment friendly farming practices, they can sell carbon offsets. In the US, farmers organize into unions for selling carbon credits. For a small fee, a farmer can enroll into the union. The union will advise farmers; hire experts on their behalf and collect and index information related to the products. The farmer must meet certain conditions before he or she can sell offsets.
Who Monitors The Trade?
Buying carbon credits is not monitored by the US government. The concept was proposed by private parties, and till now no formal legislation has been provided for buying carbon credits. In the US, the offsets are traded at the Chicago Climate Exchange. The carbon credits have to have proper certification in order to be valid. Because the government does not regulate this trade, many parties offer certifications for the market. You need to check local guidelines to see if a particular offset has relevant certification.
According to the World Bank, over USD 20 billion worth of carbon credits were sold in 2006, and more in 2007. Buying or selling carbon credits works on the cap-and-trade policy, organizations and individuals can emit only the amount of greenhouse gases for which they have a permit. This ensures that industries and individuals have a financial incentive to bring down carbon dioxide, and parties that adhere to emission norms get rewards. Buying of carbon credits and selling of carbon credits is a step toward making the world a better place.