Carbon Market
Before we start, just a small, not-so-fun fact: About 15 trees are needed to take up the carbon dioxide we emit every day.
What exactly is a Carbon credit?
We all are aware of global warming. It is real and it is happening.
A carbon credit is a future, market-based approach to reduce the concentration of greenhouse gases in the atmosphere by issuing a certificate that represents the right to emit one metric tonne of carbon dioxide or the equivalent amount of a different greenhouse gas.
What about people and corporations who don’t emit one tonne of CO2?
They earn carbon credits (reducing 1 tonne of CO2 earns 1 carbon credit). One of a kind of economic incentive!!
If emissions are above the allowed limit, the emitter must buy carbon credits from those who have excess credits.
Thus, crossing the emissions limit imposes a cost (amount spent on the purchase of carbon credits) on the emitter. The idea will force the emitters to be more efficient and reduce emissions because it comes with a cost.
A carbon market allows the trading of both carbon offsets and carbon credits simultaneously.
How can one offset carbon emissions?
a) Reduce the amount of carbon emitted
b) Remove the carbon already emitted into the atmosphere
Ways to do it:
1) Using energy-efficient appliances across the world and supplying the same to rural or impoverished regions.
2) Switching to alternate sources of energy like solar, geothermal, hydro and geothermal wherever possible.
3) Creating biofuel by capturing carbon from the atmosphere.
4) Return biomass to the soil instead of removing or burning it after harvest. This also helps in preserving water as it reduces evaporation from the soil surface.
5) Tree plantation and supporting reforestation projects.
India has passed a bill to set up carbon credit markets in the country but will not allow carbon credit exports until its climate goals are met, Power minister Raj Kumar Singh said.
Why should we indulge in the carbon market?
1) Helps in reducing GHG emissions and aids to reduce the adverse impacts of climate change
2) Generation of renewable energy and sustainable agriculture.
3) The voluntary market for offsets is open for everybody who wants to reduce their carbon footprint because it is not compulsory by law.
4) By contributing to carbon credits and offsets, the companies can send a positive signal to the people who are well aware of the current global damage.
5) It is an additional revenue stream.
Where is it traded?
Carbon credit in India is traded on NCDEX( National Commodity & Derivatives Exchange Limited) only as a future contract.
It is expected that India will gain at least $5 billion to $10 billion from carbon trading (Rs 22,500 crore to Rs 45,000 crore) over a period of time. Also, India is one of the largest beneficiaries of the total world carbon trade through the Clean Development Mechanism claiming about 31 percent (CDM).
Everything has its pros and cons:
1) Buying carbon credits can make the rich nations not indulge in reducing emissions because they can simply buy cheap carbon credits from developing countries.
2) Huge surplus of carbon credit in the voluntary markets is suppressing the price of carbon credits, making it easier for emitters to continue emissions while buying cheap offsets.
3) Offset projects like afforestation and wind energy make it difficult to keep a track of carbon reduction. Additionally, emission reductions and assigning carbon credit when the project does not occur for any reason create complexity.
Let’s talk price:
India-originated carbon credits trade on voluntary international markets anywhere between $0.5-15 per tonne of CO2.
India is the third largest emitter of GHG.
Every year in northern India, 23 million tonnes of paddy stubble is burned which contributes about 40% of New Delhi’s pollution during winter months and an annual economic cost of around $30 billion.
Good news?
Indian farmers can now trade in carbon credits to boost income as it should because it sustains half of India’s 1.4 billion population and is a major contributor to greenhouse gas pollution.
During COP26, India announced a reduction of one billion tonnes of carbon by 2030, reducing the carbon intensity of GDP by 45% by 2030.
Cryptos are cool, but Carbon credits are cooler!!
Until then, keep your spirits high and your carbon emissions low.