Abstract
The earth is facing drastic changes concerning its environment and multiple measures are being taken to save the environment. The international environmental law works towards providing these measures in order to save the globe’s environmental health. Carbon Credits are one of these measures. Carbon Credits are permissions given to corporations, allowing them to emit CO2 gas in the environment caused by their production process and industrial operations. A company or industry can buy Carbon Credits from the Government in Carbon Markets to gain permission for the emissions that their company’s production causes. Carbon Markets have come into existence due to the demand for a reduction in the Carbon Footprints that the industrial production causes. This demand was laid down after the Kyoto Protocol of 1997 and the Paris Agreement of 2015 where CO2 emission targets were set for environmental issues. Therefore, Carbon Credits are intended to serve as a financial incentive for corporations to minimize their greenhouse gas emissions and engage in greener, more sustainable operations. Carbon credits and carbon offsets are the two categories that have been found to help industries and corporations reduce their carbon footprints. An organization gets carbon credits when it invests in a carbon offsetting scheme. To simplify this, rather than decreasing their own emissions they decide to purchase these credits called Carbon Credits which represent a decrease in emissions somewhere else. The sale of Carbon Credits takes place in two types of markets: Regulated Markets and Voluntary Markets. One Carbon Credit gives permission to emit one ton of CO2 gas emissions. However, adapting to the credit market allows some corporations, particularly the more lucrative ones, to continue emitting greenhouse gases. Further, the trading of these Carbon Credits is regulated by Carbon Market regulators, but there are no such stringent legislations made for its regulations.
Keywords: Carbon Credits, Environmental law, Carbon footprints, Carbon emissions, Carbon markets
- Introduction
The increasing industries and corporations in the world due to the high demand of supply by human beings has also led to increase in the production and manufacturing processes. These processes make use of extensive technology and machines which in the course of production emit CO2 gas in the environment. This causes the environmental health to deteriorate and thus affect our earth severely. The compliance with the International environmental law and its objectives was necessary and hence the Kyoto Protocol of 1997 and the Paris Agreement of 2015 set worldwide CO2 emissions targets in order to protect the environment. It was ratified by all but six countries and has brought about country wise emissions targets and rules to back them. Due to these regulations, corporations and industries are demanded to decrease their Carbon Footprints, and a few market-based approaches were introduced, counting Joint Implementation, Emission Trading, and the Clean Development Mechanism (CDM). The CDM[1] enables nations with emission-reduction goals to execute emission-reducing projects in developing nations with respect to the international environmental law. Over time, carbon markets advanced to encourage the trading of these credits, permitting corporations that surpassed their production emissions cap to purchase credits from those with surplus, subsequently dodging hefty penalties. The corporations buy these surplus and proceed their emissions over the cap as they are a form of permits to do so. As a result, this gave rise to the concept of carbon credit markets. Carbon credits and carbon offsets are the two categories that have been found to assist industries and corporations decrease their carbon footprints.
- Carbon Credits: Carbon Credits are permissions given to corporations and industries allowing them to emit CO2 produced by means of their production and industrial operations to reduce their Carbon Footprints.
- Carbon Offsets: Carbon offsets are exchangeable “rights” or certificates affiliated to activities that decrease the amount of carbon dioxide (CO2) in the environment. By purchasing these offsets, a corporation or industry can finance activities that battle climate fluctuations, rather than applying measures to decrease their carbon emissions.
[1] Article 12 of Kyoto Protocol to the United Nations Framework Convention on Climate Change.