Carbon Credits Explained

WHAT IS A CARBON CREDIT?

A Carbon Credit is created when the equivalent of one metric ton of carbon dioxide is prevented from entering the atmosphere. Internationally known as Certified Emission Reductions, Emission Reduction Units, or Verified Emission Reductions, each carbon credit has a monetary value depending on the type and origin of the emission reduction produced.

WHAT ARE THEY WORTH?

Each carbon credit can be traded on the open market, with the current spot rates on the European Union’s Emission Trading Scheme averaging 25 Euros per tonne during 2008, (EUA DEC ’08).

With the onset of the current global financial crisis and the reduction in the price of oil, the emissions market has been affected. Please see the current spot rate as indicated by the graph just below. As the economy begins to recover and the price of oil rises, the value of carbon credits will also increase.

WHO BUYS CARBON CREDITS?

Carbon credits are mostly purchased by governments & corporations who have a legal or moral duty to reduce their carbon footprint. A growing number of individuals are also purchasing sufficient personal carbon credits to claim a ‘carbon neutral’ lifestyle.

Although these organizations could implement change in their home country by sponsoring emission reduction projects locally, the economic benefits of deploying an equivalent emissions reduction scheme in the developing world for a fraction of the cost is what drives the international trade in ‘carbon offsets’.

WHAT IS CARBON OFFSETTING?

Carbon offsetting is the process by which a successful emissions reduction is produced in one geographical location and claimed by another.

For example, a hydro electricity generation plant established in South America with the financial assistance of the Japanese government displaces the more polluting local oil & coal fired power stations, thereby creating a sizable carbon emissions reduction.

In return for providing the financial assistance, (without which the project would not have occurred), and allowing the international transfer of technology to support the plant, the Japanese government may claim the carbon emission reduction for their home country, thereby offsetting their national carbon reduction commitments.

In return, the developing nation develops sustainable resources, retains first world technology & benefits from a cleaner domestic environment.

EMERGING CARBON MARKET: WHAT’S IT WORTH?

Lawmakers, such as the previous Secretary of State for the Environment, Rt Hon. David Miliband MP, passed legislation to cut 60% of CO2 emissions in the United Kingdom by the year 2050.

“…If all industrialized countries took on emission-reduction commitments of 60-80%, purchased half of their reductions in the developing world, with each credit valued at $10, the global market would be worth $100bn per year…” [United Nations]

ROBOTIC PARKING SYTEMS: REDUCES CO2 EMISSIONS

Robotic Parking Systems can also help in the drive to reduce greenhouse gas emissions. The recently completed Ibn Battuta Gate parking garage in Dubai reduces CO2 emissions by more than 100 tons per year with comparable reductions in other pollutants and greenhouse gases. It additionally saves 9,000 gallons of gasoline per year thus contributing significantly to carbon footprint reductions.

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