When we eat off a plate, we do not buy new plates to exchange our food-stained ones. We do not buy new clothes every time we soil our laundry. Yet, we buy 'carbon credits' for clean air when we put carbon dioxide into our existing air.
"Earth provides enough to satisfy every man's need, but not every man's greed"
The "Carbon credit" is a lame excuse or a tiny amount of bribe one has to pay for polluting our planet. What one buys is 'air'. One person who has clean air sells it to someone with dirty air. Alternatively, the person with dirty air agrees to pay for having trees planted somewhere. This erases the offender's "carbon footprint" without the offender actually doing anything. That is what bugs many of us. The offender goes on with doing his offending, but gets a nice, shiny eco-badge from somebody. Is the money that changes hands under the 'carbon credit' is really going to save our planet?
No, if we are going to be serious about cleaning the environment, then it has to be through more than "carbon credit". The thing is we have been researching ways to help the environment for decades. Why have not we come up with something by now? In addition, why was it global cooling or global warming that were the villains barely 20 years ago? If the scientists were not right about the global climate then, why should we believe that they are right about it now?
According to eminent scientists, the total energy reaching Earth from the Sun varies by only 0.1 percent across the solar cycle and scientists now think these ups and downs cause natural weather and climate variations other than the subtle effects from the larger pattern of human-caused global warming. Building on previous work, the NCAR (National Center for Atmospheric Research) in Boulder, Colorado, researchers used computer models of global climate and more than a century of ocean temperature to answer longstanding questions about the connection between solar activity and global climate.
They found that, as the sun's output reaches a peak, the small amount of extra sunshine over several years causes a slight increase in local atmospheric heating, especially across parts of the tropical and subtropical Pacific where Sun-blocking clouds are normally scarce. That small amount of extra heat leads to more evaporation, producing extra water vapor. In turn, the moisture is carried by trade winds to the normally rainy areas of the western tropical Pacific, fueling heavier rains.
Carbon is composed of three different isotopes 14C, 13C and 12C of which 12C is the most common and 14C (used for dating purposes) is only about 1 in 1 trillion atoms. 13C is about 1% of the total.
Over the last few decades, isotope geochemists have worked together with tree rings experts to construct a time series of atmospheric 14C variations over the last 10,000 years. This work is motivated by a variety of questions, most having to do with increasing the accuracy of the radiocarbon dating method. A byproduct of this work is that we also have a very nice record of atmospheric 13C variations through time, and what we find is that at no time in the last 10,000 years are the 13C/12C ratios in the atmosphere as low as they are today. Furthermore, the 13C/12C ratios begin to decline dramatically just as the CO2 starts to increase - around 1850 AD. This is no surprise because fossil fuels have lower 13C/12C ratios than the atmosphere.
"Don't blow it, because good planets are hard to find"
The world's first internet-based auction of UN-approved carbon credits was successfully completed on October 2, 2008 (October 2 is Mahatma Gandhi's Birthday), with four anonymous buyers agreeing to acquire 255,592 certified emission reductions (CERs) at a price of €19.05 (£14.93) per ton. Under the terms of the auction, the parties entered into a binding contract as soon as the auction closed and the CERs, which come from two biomass projects in Chile operated by forestry company Arauco. James Emanuel, commercial director at CantorCO2e, the company operating the auction service, said that the auction had exceeded expectations.
Now-a-days, carbon credits are advertised as a way for polluters to offset the greenhouse gases they produce. Just write a check, and someone else will reduce his emissions, so you can keep driving your diesel-truck or operating your coal-burning power plant without guilt.
Emerging out of thin air, carbon credits, already surpassed solar and wind, as the largest clean-tech industry. Carbon credits were worth a staggering $63 billion in 2007 and $59 billion in the first half of 2008 alone.
During a product life cycle, energy is required to extract, transport and refine the raw materials, for manufacturing and to distribute the final product and treat the waste at the end of a its useful life.
As fossil energy carriers play the major role for energy supply, any of the above steps is associated with the generation and emission of greenhouse gases (GHG), such as carbon dioxide, methane, nitrous oxide, etc., contributing in turn to the global warming effect, which is measured as the product's carbon footprint.
Life Cycle Assessment according to ISO 14044 (also covered in the BSI PAS2050) is the state-of-the art methodology to determine your product carbon footprint. Facilitating such a "cradle-to-grave" carbon footprint analysis of your product will disclose your real carbon footprint, reveal reduction potentials and discover negative trade-offs, i.e. the shifting of environmental burdens from one stage of the life cycle to another.
It is impossible to rely on company-specific data only to conduct an LCA and comply with the high requirements of the international standards. Thus, high-quality databases are essential to quantify the carbon footprint.
The Kyoto Protocol is a legally binding agreement that arose out of the UNFCCC (United Nations Framework Convention on Climate Change) to tackle climate change through a reduction of green house gas emissions. Countries (those listed in Annex I) are legally bound to reduce man-made green house gases emissions by approximately 5.2%. Individual countries have their own reduction targets outlined in Annex B of the Kyoto Protocol.
The European Union (EU) saw its Emission Trading System achieve an overall carbon dioxide (CO2) emissions reduction of 3% in the year 2008 compared to 2007 levels. This was a result of installations reducing their own emissions, buying emissions within the EU Emissions Trading Scheme and buying emissions through the Clean Development Mechanism (CDM). The total amount of confirmed emissions from Emissions Trading System installations in the EU-27* in 2008 was 2.052 billion tons of CO2, 3% lower than the 2.118 billion tons recorded for 2007 in the same countries.
In 2008, companies in the EU used 81.7 million generated through the Clean Development Mechanism (CDM), out of which 31% of these credits came from India i.e. approximately 25 million tons. Indian companies have been using the CDM effectively for reducing more emissions than would have been the case without CDM. For 2008, the 25 million credits from Indian CDM projects had an estimated value of around INR 24.8 billion provided by the EU at present EU carbon prices.
CDM allows industrialized countries to meet their emission reduction targets by paying for green house gas emission reduction in developing countries. For example, (Figures are hypothetical), a company in Brazil switches from coal power to biomass. The CDM board certifies that by doing this the company has reduced Carbon dioxide emissions by 100,000 tons per year. It is issued with 100,000 CER's (Certified Emission Reductions). Under the Kyoto Protocol, the United Kingdom has to reduce its green house gas emissions by 1 million tons of carbon dioxide each year. If it purchases the 100,000 CER's from the Brazilian company, this target reduces from 1 million tons/year to 900,000 tons per year making the goal easier to achieve.
Europe has been dominating the carbon market since its creation. EU's Emissions Trading Scheme (EU ETS) was responsible for 70% of the trading in the first half of this year, totaling $47 billion. This dollar amount is likely to increase as the cost of carbon credits soars and with the inclusion of aviation emissions in 2012.
An investor alliance of 385 banks, insurances and pension funds in Germany represents the Carbon Disclosure Project (CDP) with an investment capital of 57 trillion US Dollar.
Obviously, an industry of this amount of rapid growth opens many business opportunities. Companies are needed to provide verified emissions offsets, energy efficiency audits, greenhouse gas emission audits, and to design carbon software. This industry has gained considerable interest from venture capitalists.
Although it is great to see action being taken to reduce greenhouse gas emissions, carbon credits can be a way for an organization to throw money at a problem instead of taking action to reduce their own carbon footprint of their operations. The effectiveness of carbon markets has been questioned, yet this industry does not seem to be going anywhere any time soon.
Another obvious problem: who regulates what a carbon credit is? In addition, what about nations that put out excessive levels of other well-known greenhouse gases such as methane? The goal of the Kyoto protocol should have been reversing the trend of putting out excessive greenhouse gas. Instead, it became a back door method for dispensing foreign aid to third world countries under the guise of carbon neutrality.
An influx of aid of that sort would be a steady source of corruption because the countries receiving the aid know that the donor countries need to dispense it. There are few guarantees that the aid would actually accomplish anything.
In theory the carbon-credit trading scheme is a thoroughly modern and intelligent approach to reducing world pollution. Rich First World companies are financially encouraged to help poorer Third World companies clean up their manufacturing processes. They do this by accepting 'carbon caps', or limits, which if exceeded can be replenished by purchasing carbon credits -- via specialist traders -- from manufacturers in the developing world.
In practice, however, there are loopholes that seriously threaten the schemes' credibility. The most significant are these: they take into account only greenhouse gases, money made through trading credits can be used to expand a business so increasing pollution and, perhaps most questionably, auditors of the scheme are paid for by the companies.
Carbon credits have become such a profitable commodity that market speculators -- hedge funds, banks and pension funds -- have enthusiastically bought into them. Traders buy and sell credits issued by both the UN and EU schemes. For trading purposes, one allowance or Certified Emission Reduction (CER) is equivalent to one ton of CO2 emissions. These credits can be sold privately or on the international market.
A tale of two countries, Canada & India
An organic farm couple from the Yukon in Canada had been struggling to make ends meet, and keep their farm going, so they ventured into making it a co-operative with little success and new moneymaking plan had to be devised. And, thus, entered into the picture the sale of their "carbon credits".
Basically, they figured out how much their carbon sinks were worth per ton, and how much they could sell off in credits to mining and oil company concerns in the Yukon to offset their carbon emission footprints. The Green couple, noted that x amount of land had been designated for farming in the Yukon, and that other people who wanted to farm could join in on the carbon credit sales to fund themselves and thus the Yukon could become "carbon neutral" in short order. The money making scheme was even extended out to farmers in the southern part of Canada to help their bottom line and to make Canada carbon neutral.
First, the farms already exist, so they are already offsetting carbon deposits in the atmosphere, they do not all of a sudden magically do this after the person owning the farm figures out how much their carbon sinks are worth and sells the credits to carbon producers, and thus on paper make any given area "carbon neutral". The state of carbon neutrality would already exist; the only change made would be a paper shuffle, with money being paid for the carbon sinks, as opposed to their just "being there" already. Therefore, in reality, what would be going on is status quo, but a new cash cow would be created. If Canada can become "carbon neutral", by farmers figuring out the amount of carbon sinks they have per ton and then sell the credits to industry, then Canada is already carbon neutral.
Second, in the case of the Yukon, already naturally occurring carbon sinks, in the form of natural plant/tree growth, would be cleared to make farmland, which would make an immediate net loss of carbon sinks and the emission of more carbon, until the farm was under production. Then, after the farm became a producer, the farmers, could figure out the worth of their carbon sinks, and sell the credits. So in essence we would have a falsely created economy based upon carbon sinks that already would have been occurring with natural vegetation, only nobody had figured out their worth and put them on paper as an offset sink.
Of course, there would be more considerations to this, such as how long it would take said farm to make up for; the net carbon loss sinks that had been occurring naturally before they cleared the land, how much carbon was emitted during the clearing and cultivation processes, as well as figuring out if the natural vegetation was a bigger sink, than the farm itself would become. Because if there is a net loss of carbon sinks through turning the land in agricultural production, then the new farmers can hardly sell carbon credits on that which would have produced more carbon sinks naturally.
Now the case can be made that more farms in the Yukon need to occur in order for the lowering of carbon emissions from distance produce shipping and that they need subsidies in order to remain afloat, and thus the sale of the carbon credits can be seen as subsidies. And, the same can be said for farmers elsewhere too, that they need subsidies in order to exist and that carbon credit sales would give them the additional money they need.
The CDM pilot project, a part of the larger Haryana Community Forestry Project, co-funded by the European Commission, was the first small scale aforestation project in the world to get certified by the Clean Development Mechanism (CDM).
In this project an aforestation area of 370 hectares of sand dune land belonging to 227 farmers in eight villages of Sirsa district, Haryana, has been selected for a carbon-trading project within the Kyoto Protocol Clean Development Mechanism (CDM) under the United Nations Framework Convention on Climate Change (UNFCCC). A number of participatory appraisal exercises with stakeholder farmers were carried out, by-laws for a farmers' society to implement the project were framed and the society was registered. Validation of the proposed project activity by a company accredited by UNFCCC was carried out through site inspection in April 2008 and the proposed CDM project was approved by the UNFCCC CDM Executive Board on 23 March 2009.
The EU provides a market for a range of CDM credits, while EU countries may purchase CDM forestry credits limiting Climate Change to 2°C. The EU's objective is to ensure that global average temperature does not increase more than 2°C above pre-industrial levels. To avoid this, global emissions of greenhouse gases must peak before 2020 and then greatly decrease by 2050. The necessary cuts in global emissions can be achieved only if all countries contribute their fair share according to their responsibility and capacity. In addition, even if the temperature increase stays below 2°C there will still be a need for significant adaptation efforts by all countries.
Today in the EU, companies buy carbon credits at 22 Euros per ton of carbon dioxide. However, CER's arising out of CDM have been sold for a pittance -- for only 5-10 Euros.
It is not clear why this price difference exists. Ishani Chattopadhyay, Director of Ecosecurities, India, a carbon credit trader that buys CER's from India for sale in Annex I countries says firstly that CER's and EU credits are different. The EU Credits give an automatic right to emit carbon dioxide because they are emissions allowances. CER's are subject to verification by the UNFCCC.
Second, there are country risks for operating in developing countries and dealing with small companies.
Third there is no "stock exchange" for CER's yet, since the first CER's have only just been issued for sale on October 20 2005. CER's are bought and sold in private deals where prices are not revealed, so a fair price is difficult to arrive at. Mukul Sanwal of the UNFCCC agrees that greater transparency would improve the price. He also stresses though that it is a failure of the market systems in India is also depressing the price. "This is the same old commodities problem again", says Sanwal referring to the situation where commodities like coffee are sold at subsistence levels in developing countries, yet earn huge windfalls for companies in the developed world. Developed countries are extracting the benefits of CDM or milking the developing nations in the name of 'Carbon Credit.'
"There is so much pollution in the air now, that if it were not for our lungs there would be no place to put it all"
Before concluding, I would like to add the comments of an anonymous lady from the USA:
"Please be patient with me, for, I am not very bright. Let me try and understand this 'carbon credit'. If I am a very rich company who makes big money by polluting and I will keep making big money by polluting even more and I am willing to pay out any type of carbon tax (offsetting) or whatever you want to call it, then how in the world are we helping the environment. Are we simply not giving a license to the polluters? Yes, I am aware that if all things were fair and we played nicely that the system just might work, but in a greedy society and in a world in which one has a China and an India who do not want to play fair then I do not see how offsetting anything will work. For every dollar that any corporation or country offsets they will more than double spit out in carbon emissions! Why? Because they will want to recover that money and then they will want to pass that on to consumers who in turn will pollute etc., etc., I am afraid that I am just too dumb to understand this genius idea. I know the mechanics, but I also know human nature and that has never failed me regardless of how bad things get."
"Sun O' Sun, though you are hot, without you, this Planet will rot".