What is a carbon credit?
Before we start understanding about carbon credit, it is important to know about carbon emissions, or rightly put, the emissions of carbon dioxide into the environment. Carbon dioxide is one of the most common greenhouse gases that goes up into the atmosphere, along with water vapour, methane, nitrous oxide and ozone. The word “greenhouse” implies that these gases formed a layer that traps heat from the sun, causing a greenhouse effect on the earth surface. These gases will eventually escape into space gradually and this warming of the earth’s surface is important to sustain life.
However, after the birth of the industrialization age, factories and machineries had produced excessive amount of these gases and most are trapped at the ozone layer of the atmosphere instead of their escape into space. This has caused a significant rise in the earth’s temperature which in turn had caused changes in the climate, like the melting of the ice-caps which resulted in the rise of oceans level, hotter summer and colder winter, continuous rainfalls which resulted in floods, and more natural disasters. These will in turn affect our food sources, affect our habitats and way of lives. Although most scientists would not acknowledge global warming and some naysayers would suggest it is just a cyclical event, no one can deny that there are changes to the environment and these are felt everywhere.
From a conceited effort of the countries of the world under the United Nations Framework for Climate Change (UNFCCC), an international treaty was adopted in 1997 at Kyoto Prefecture, Japan for all members states to reduce their emission levels (hence this was known as the Kyoto Protocol or Accord). Through approved methodologies by UNFCCC, projects which were able to reduce carbon emissions were awarded carbon credits. One carbon credit is equivalent to one tonne of carbon dioxide emitted. A carbon credit is given in the form of a certificate and it can be traded. The buying of carbon credits therefore is an financial incentive given to the project owner who has made effort in reducing carbon emissions.
There are various types of carbon credits. The common ones are the Carbon Emission Reduction (CER) certificates issued by the Clean Development Mechanism which is governed ultimately by UNFCCC, Voluntary Carbon Units issued by VERA and Gold Standard Carbon Credits issued by Gold Standard. In the next blog sharing, you will see that not all carbon credits are equal although they all served the same purpose of reducing one tonne of carbon emission.