Carbon Credit Concept

What does a carbon credit mean?

• Carbon credits are permits or certificates that can be bought and sold that allow the release of one tonne of carbon dioxide or another greenhouse gas of the same amount. Projects that cut down on or get rid of greenhouse gases in the air make carbon credits.

Carbon credits: How do they work?

• Carbon markets, which let businesses and other groups buy and sell carbon credits to meet their emission reduction goals, are where carbon credits are sold.
• One example is a company that has too many emissions can buy carbon credits from a company that has cut its emissions below its limit.

Such as:

• A company that owns a coal-fired power plant might be limited to putting out 100,000 tonnes of carbon dioxide each year. More than 100,000 tonnes of carbon must be bought by the company from other businesses that have cut their own emissions below the limits set by the company.

 

History of Carbon Credit:

• The initial mention of carbon credits can be traced back to the 1997 Kyoto Protocol, a global accord designed to mitigate the release of greenhouse gases. A market for carbon credits, which are tradable permits representing one metric tonne of carbon dioxide removed from the atmosphere, was established by the Kyoto Protocol.
• Initiatives that decrease greenhouse gas emissions, including but not limited to afforestation, renewable energy, and energy efficiency initiatives, have the capacity to generate carbon credits. Subsequently, carbon credits can be acquired by governments and corporations to offset their own emissions.
• Carbon exchanges facilitate the buying and selling of carbon credits. Carbon credit prices are governed by the interplay between supply and demand. A surge in demand for carbon credits will result in an increase in price. A decrease in price can be anticipated for carbon credits in the event of minimal demand.
• By utilising the carbon credit market, greenhouse gas emissions can be reduced in a market-oriented manner. It enables governments and businesses to reduce emissions in the most economical manner.

 

Carbon credits have a lot of advantages, such as:

 

• They give businesses and other groups a cash reason to cut down on their greenhouse gas emissions.
• When companies in different countries have different goals for lowering emissions, these rules help all of them perform the same way.
• These groups can help developing countries get technology and funding from more developed ones.
• Carbon credits have some problems.

 

There are also some problems with carbon credits, such as:

• Sometimes it’s hard to figure out how much carbon credit projects actually cut pollution.
• Carbon markets can be hard to understand and cost a lot to run.
• Carbon markets have a chance of being hacked or lied to.

 

Solve this Quiz:

 

Which of the following is NOT a benefit of carbon credits?

(A) Reduce greenhouse gas emissions
(B) Reduce the cost of climate change
(C) Create jobs and economic growth
(D) Increase profits for companies

Answer: (D) Increase profits for companies

• Carbon credits are not designed to increase profits for companies, but rather to create a financial incentive for them to reduce their emissions. By trading carbon credits on a market, companies can offset their own emissions or sell carbon credits to other companies that need them to meet their compliance targets. This can help to reduce the overall cost of reducing greenhouse gas emissions.
• However, it is important to note that carbon credits are not a silver bullet for climate change. They must be used in conjunction with other policies and regulations to achieve meaningful reductions in greenhouse gas emissions.

 

Mains Question:

Talk about how carbon credits can help slow down global climate change. What problems do you think will come up when you try to set up carbon credit markets?

 

Model answer is:

• Carbon credits are a big way to help slow down climate change because they give businesses and other groups a financial reason to cut back on greenhouse gas production. It is also possible for developed countries to give technology and resources to developing countries through carbon credit markets. This can help lower world emissions.
• The implementation of carbon credit systems, on the other hand, comes with a number of problems. Carbon credit projects can help cut down on pollution, but it can be hard to measure and confirm these effects. One more problem is that carbon markets can be hard to understand and cost a lot to run. There is also a chance of scam and dishonesty in coal markets.
• These problems notwithstanding, carbon credits may be a useful way to slow down climate change. Businesses and governments should work together to create and run carbon credit markets in a way that makes the most of their advantages and reduces their risks.

In conclusion

• Carbon credits are hard to understand, but they are a big part of the world effort to slow down climate change. People who want to work for the UPSC should know what carbon credits are and how they work. Also, they should know what the pros and cons of carbon credit markets are.

 

Discuss the effectiveness and limitations of Carbon Credits as a mechanism to combat climate change. (250 words)

 

Model answer is:

The Carbon Credit method is an innovative way to deal with greenhouse gas emissions that is based on the market. It works on the idea of “cap and trade,” which means that countries or companies are limited in how much pollution they can make, and those that pollute less can sell the credits they don’t need.

How well it works:

• Financial Incentives: Companies want to cut down on pollution because they can make money by selling extra credits.
• Flexibility: It gives businesses the freedom to choose whether to buy credits or invest in better technologies, depending on which option is more cost-effective.
• Participation around the world: A lot of countries have set up carbon trade systems, which makes them a well-known way to cut down on pollution.

 

Some problems:

• Inequality: Companies with more money can buy more credits instead of lowering their pollution, which goes against the point of lowering carbon.
• Verification: It can be hard to keep an eye on and confirm leaks, which could lead to mistakes.
• Focus on the Short Term: Businesses may buy cheap credits now to make money in the short term, rather than spending in long-term practises that will last.
• To sum up, Carbon Credits have been useful in creating a market-based way to manage emissions, but they have some problems that need to be fixed before they can be a complete answer to climate change.

 

How it is useful for UPSC and Other Exams:

• As you study for the UPSC test, you should know about carbon credits because they are a key way to fight climate change and lower greenhouse gas emissions. Climate change is a big problem for everyone, but India is one of the places where it will hurt people the most.
• Climate change is covered in a number of UPSC subjects, such as the Kyoto Protocol, the Paris Agreement, and carbon credits. People who want to work for the UPSC should understand what carbon credits are and how they work.

 

Prelims:

• What is CDM, or the Clean Development Mechanism?
• Why is there a market for carbon credits?
• Carbon credits: How do they work?

Mains:

• Talk about how carbon credits can help cut down on greenhouse gas pollution.
• What problems and chances does the market for carbon credits present?
• What does India need to do to use carbon credits to reach its climate change goals?
• Aspirants for the UPSC can read the following to get ready for questions on carbon credits:

 

UPSC syllabus: The Kyoto Protocol, the Paris Agreement, and carbon credits are all on the UPSC syllabus and they are all linked to climate change. People who want to work for the UPSC should make sure they know the syllabus and have read the important parts.
Books from NCERT: The Geography and Environment books from NCERT go over the basics of climate change and carbon credits. People who want to work for the UPSC can read these books to learn a lot about the field.
Current Affairs: People who want to work for the UPSC should also keep up with events in the world that have to do with climate change and the carbon credit market. Their reading of newspapers and books, as well as their use of news websites and social media, offer this chance.