CARBON CREDIT

• It is a generic term
• A unit related to the reduction of one ton of CO2 emission from the
baseline of any project activity.
• It is a value assigned to a reduction or offset of GHGs.
• Calculated per metric ton.
• An innovative way of establishing a legal obligation on the part of
polluters to act in the best interest of the society.
Calculation
• Each ton of dry tree weight (biomass) is equal to one-half ton of
carbon.
• It is estimated that one ton of carbon produces 3.67 tons of Carbon
di-oxide if the biomass is burned.
• One ton of CO2 that is not released into the atmosphere is equal to
one carbon credit.
Though a number of terms are used interchangeably for carbon
credits; like carbon offsets, allowances, verified emissions reductions
and so on; not all of them are the same.

CARBON OFFSETS

• They are emission reduction instruments which refer to reduction in

GHGs, including CO2, methane, nitrous oxide, and CFC emissions.
• Carbon offsets credits can be earned if a corporation reduces the
GHGs and uses cleaner forms of energy like wind power, solar energy
and hydro power to run their business.
 CARBON ALLOWANCES

• They are the allowances to emit.

• In the event of an entity emitting less GHGs than permitted by its
allowances, it can sell its carbon allowances in the market.
 SIGNIFICANCE OF CARBON CREDIT
• Carbon credit occupies a key position in the efforts towards reduction
of carbon emission.
• There is a great demand for carbon credits in Annexure 1 countries,
particularly in industries like power utilities that have to achieve
emission reduction targets. It may be easier and cheaper for them to
buy offsetting certificate rather than reducing emissions.
• Trading of carbon credits is done in commodity exchanges, the world
over.
LIMITATIONS AND PROBLEMS WITH
CARBON CREDIT
• Carbon credit trading has its own problems for the developing countries.
• There are experts who claim that carbon trading may not deliver the
desired results. They claim that carbon credit could result in the
exploitation of developing countries who fail to get the deserved price
for projects taken with the intention of reducing carbon emission, while
the emitters of carbon which include developed countries would get
away with increased emission levels.
• Thus , carbon credit, instead of viewing climate change as the biggest
challenge confronted by humanity, would deal with it like business as
usual.