Call Us Now

+91 9606900005 / 04

For Enquiry

legacyiasacademy@gmail.com

Summary of New Study on Carbon Trading Mechanisms

Context:

The study published in Nature journal looked at projects that together generated carbon credits worth one billion tonnes of CO2 equivalent. Under the Paris Agreement, more robust carbon trade mechanisms are being created, with some progress expected to happen at the ongoing COP29 meeting in Baku.

Relevance:

GS III: Environment and Ecology

Dimensions of the Article:

  1. Summary of New Study on Carbon Trading Mechanisms
  2. Overview of Carbon Credits
  3. How the Carbon Credit Mechanism Works
  4. Types of Carbon Credit Markets
  5. Challenges and Criticisms

Summary of New Study on Carbon Trading Mechanisms

A new study published in the Nature journal has scrutinized the effectiveness of carbon trading mechanisms, specifically evaluating their impact on achieving real emission reductions. Conducted by researchers from both European and American institutions, the study reviewed thousands of projects that collectively generated carbon credits equivalent to one billion tonnes of carbon dioxide. Here are the key insights and findings:

Effectiveness of Carbon Credits

  • The study found that only 16% of the carbon credits analyzed were directly linked to actual emission reductions.
  • The majority of these credits were issued under mechanisms established by the Kyoto Protocol, which has been criticized for its effectiveness and has since been succeeded by the Paris Agreement.

Project Type Effectiveness

  • Projects aimed at reducing HFC-23 emissions proved most effective, with 68% of the credits resulting in genuine emission reductions.

Additionality and Integrity

  • The concept of “additionality” is crucial, ensuring that emission reductions are a direct result of carbon credit funding and would not have occurred otherwise.
  • However, the study highlights that many projects failed to meet this criterion, leading to the registration of non-additional projects.

Recommendations

  • Researchers recommend stricter criteria for project eligibility, focusing on projects that truly depend on carbon credit revenues.
  • They also call for improved standards and methodologies to quantify emission reductions and ensure the credibility of carbon credits.

Developments Under the Paris Agreement

  • The carbon market mechanism is the last component of the 2015 Paris Agreement that is yet to be fully operationalized.
  • Efforts are underway to develop more stringent frameworks for carbon trading to overcome the limitations identified with Kyoto-era mechanisms.

New Mechanisms Under Development

  • Bilateral Country-Level Trade: This mechanism allows countries that exceed their emission reduction targets to sell credits to others through direct agreements.
  • International Carbon Market: This broader market will include multiple participants, with new institutions tasked with regulating, verifying, and authenticating credit trades.

Progress at COP29

  • The ongoing COP29 meeting in Baku has seen the approval of two key rules related to carbon markets on its opening day, signaling progress but also indicating that substantial work is still required.
  • These new mechanisms are designed to bolster the integrity of carbon credits and enhance their effectiveness in combating climate change.

Overview of Carbon Credits

Definition and Purpose

  • carbon credit is a permit or certificate that allows the holder to emit one tonne of carbon dioxide (CO2) or the equivalent amount of another greenhouse gas (GHG). These credits are a key element in national and international efforts to mitigate the increase in greenhouse gases in the atmosphere.

Generation of Carbon Credits

  • Carbon credits are generated through activities that reduce emissions or remove CO2 from the atmosphere, including:
    • Renewable energy projects (e.g., wind, solar)
    • Energy efficiency initiatives
    • Reforestation or afforestation projects
    • Methane capture at landfills or industrial sites

How the Carbon Credit Mechanism Works

Regulatory Framework

  • Governments or regulatory bodies set emission caps for industries or companies, forming the basis for the carbon credit market.
    • Organizations emitting less than their quota can sell their surplus credits.
    • Those exceeding their caps must buy credits to comply with regulations.

Certification and Trading

  • Projects that demonstrate measurable and verifiable GHG reductions are eligible for carbon credits, certified by bodies like the Verified Carbon Standard or the Gold Standard.
  • Carbon credits are traded on platforms such as the European Union Emissions Trading System (EU ETS) or voluntary markets, creating financial incentives for emission reduction.

Use of Carbon Credits

  • Organizations purchase credits to offset their emissions, aiming for carbon neutrality.

Types of Carbon Credit Markets

  • Compliance Market: Legally mandated markets under international agreements (e.g., Kyoto Protocol, Paris Agreement) where companies must comply with emission caps.
  • Voluntary Market: Allows entities to purchase credits voluntarily to meet CSR goals or personal commitments to sustainability.
Benefits of Carbon Credits
  • Environmental Impact: Promotes the adoption of cleaner technologies and sustainable practices.
  • Economic Incentives: Provides financial rewards for projects that reduce emissions, fostering innovation.
  • Flexibility: Offers cost-effective ways for industries to meet emission targets.
  • Global Collaboration: Enhances cooperation across borders to address climate change globally.

Challenges and Criticisms

  • Verification: Ensuring credits represent genuine emission reductions can be complex.
  • Market Stability: Fluctuations in credit prices can impact market stability.
  • Greenwashing: Potential misuse by companies claiming environmental responsibility without substantive changes.
  • Accessibility: Developing countries may struggle to access the resources needed to generate credits.

-Source: The Hindu


December 2024
MTWTFSS
 1
2345678
9101112131415
16171819202122
23242526272829
3031 
Categories

Register For a Free Online Counselling Session Now !

Welcome Pop Up
+91