Carbon offset credits and their pros and cons

A HISTORY OF OFFSETS

The firstand the biggest carbon offset market The United Nations’ clean development mechanism (CDM) was established in 1997 under the Kyoto Protocol, through which more than 190 countries agreed to country-by country emission reduction targets.

Over 8,100 initiatives across 111 countries are registered under the scheme. It has granted nearly two billion credits for carbon known as Certified Emission Reductions (CERs) which is equivalent to two billion tons of reduction in carbon dioxide or elimination.

HISTORIC PRICE CRASH

The majority of Kyoto credits were given to a few projects, mostly in Asia for reducing industrial gas emissions.

Concerns over the integrity of the environment of gas project credits which were inexpensive to produce caused authorities in the European Union in 2013 to stop their use to ensure compliance with their Emissions Trading System (ETS). The European Union has stated that it is not planning to accept any credit from the international market until 2021.

There are no clear signs regarding the market future in CDM credits, rates plummeted to levels of less than 1 euro per ton in 2013, and remain.

Businesses still make use of CDM credits to help achieve emission targets. However, some credit types that are newer, such as those issued since 2016, can be used in conjunction with the aviation industry offset scheme CORSIA.

The UNITED Nations CLIMATE TALKS

Negotiators from around the world are trying to come to an agreement during the climate talks of this year in Glasgow the creation of a market-based system which could let countries make use of offsets from other countries to help them achieve the goals of the Paris Climate Agreement.

The progress on this issue, called the Article 6 of the talks, came to a halt at the final negotiations in Madrid in 2019 , largely due to the fact that nations could not reach an agreement on how to handle the millions of credits that were previously issued which were created by the CDM and if they should be considered in accordance with the Paris agreement. See more at carbon.credit.

VOLUNTARY OFFSET MARKET VERSUS COMPLIANCE

The carbon offset market that is voluntary differs from compliance or cap-and-trade programs, which are that are protected by law like the EU ETS that set an unrestricted carbon budget and permits emission producers to sell allowances.

Buyers of the market for voluntary products are mostly corporate clients who are seeking to achieve internal goals in order for reducing the carbon footprint of their business.

Theoretically, the quantity of offset credits could increase so long as there are new projects that can feed in to market.

BUSINESS-AS-USUAL?

Carbon offsets are criticized by critics because they permit emitters to continue to emit greenhouse gas emissions.

They say offsets can be an effective tool, even if the primary goal is to cut emissions.

There aren’t any rules regarding the number of offsets that a company can utilize in a given year.

FORESTRY

The critics of offsets based on forestry argue that landowners who are charged for the submission of a portion of their land to carbon offsets can still chop down another portion of their forest to sell timber or permit agricultural activities in what is called leakage.

Proponents claim that any protection of forests or wetland can be beneficial for the climate.

A UNIQUE STANDARD GLOBAL

There isn’t any single globalised carbon offset standard for carbon offsets. There are a handful of organizations issue credits based on the specific standards that are verified by third-party verification agencies.

Local communities often cooperate with western-based developers as well as brokers to create projects to support credits that range from renewable energy sources located in Asia as well as clean cooking stoves across Africa and forests across South America and waste management in the eastern part of Europe.

OPAQUE PRICING

The market for carbon offsets is governed by agreements between two parties, specifically for projects which govern the marketing of specific projects plays a role in determining the value of credit.

In addition to the carbon-sequestration capacity of a project, other ecological or social benefits can determine the cost.