CARBON CREDIT TRADING
Carbon Credits
The Emissions’ Trading Scheme, created on the basis of Kyoto Protocol, is a way to fight
against climate change. Created in 1989, signed in Kyoto by 190 nations, the structure is
stimulating reduce of the Greenhouse Gases, that are harmful for the atmosphere.
Although there are 6 gases on the planet, to be named “Greenhouse” – the most spread
and harmful still stays CO2, spread by people, cars, and factories.
To create less pollution, each country government, listed in Annex 1 (including Romania,
signed in 1992), got the number of CO2 tones to spend annually (depending on the area,
industry, population, etc), which it lately spreads between the factories and industry
structures in the country.
So, each productive factory or industry is getting the certain number of CO2 allowances.
By the end of each year, the factory is giving explanations on worked CO2 gases.
If the number of worked CO2 is more than the number of given by the government, the
factory has a choice of paying penalty, or buy the CO2 QUOTAS from those who made
less, and got the CREDITS.
That is the way the CARBON CREDITS SYSTEM has developed.
Factories from all over the world are connecting to the Stock Market traders, to buy or sell
CO2 quotas, and get a profit. And the profit from each CO2 tone is 10-12 USD!
Overlooking the Emissions history in Ukraine, this is one of the countries that is not
overrating its limit, and still has the CREDITS to sell.
The Clean Development Mechanism (CDM), defined in Article 12 of the Protocol, allows a country with an emission-reduction or emission-limitation commitment under the Kyoto Protocol (Annex B Party) to implement an emission-reduction project in developing countries. Such projects can earn saleable certified emission reduction (CER) credits, each equivalent to one tonne of CO2, which can be counted towards meeting Kyoto targets.
The mechanism is seen by many as a trailblazer. It is the first global, environmental investment and credit scheme of its kind, providing a standardized emissions offset instrument, CERs.
A CDM project activity might involve, for example, a rural electrification project using solar panels or the installation of more energy-efficient boilers.
The mechanism stimulates sustainable development and emission reductions, while giving industrialized countries some flexibility in how they meet their emission reduction or limitation targets.
Carbon credits are a key component of national and international attempts to mitigate the growth in concentrations of greenhouse gases (GHGs). One Carbon Credit is equal to one ton of Carbon. Carbon trading is an application of an emissions trading approach. Greenhouse gas emissions are capped and then markets are used to allocate the emissions among the group of regulated sources. The idea is to allow market mechanisms to drive industrial and commercial processes in the direction of low emissions or less "carbon intensive" approaches than are used when there is no cost to emitting carbon dioxide and other GHGs into the atmosphere. Since GHG mitigation projects generate credits, this approach can be used to finance carbon reduction schemes between trading partners and around the world.
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