Carbon Credit Concept
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In the last few decades, the world has witnessed unprecedented climatic changes. The reason for the sky being darkened is attributed to the carbon dioxide that is emitted in the atmosphere. The continued accumulation of carbon dioxide in the atmosphere has resulted in what is now referred to as global warming. There are other causes besides burning of fossil fuels that have contributed significantly to rise of carbon dioxide in the sky among them is destruction of forests. There is increased awareness of the harmful amounts of greenhouse gases (GHG) and the consequent worldwide warming phenomenon. Put pressure on governments and private organizations to put in place systems that would curb emission of carbon dioxide in the atmosphere (Hellbrand 5).
WHAT IS CARBON CREDIT?
In the current world scenario, costs associated to global warming are always escalating. Environmentalists in their quest to reduce carbon emission and safeguarding the surroundings, put in place mechanisms to establish environmentally friendly businesses (Taibbi, Bubble 6). The rise in the emission of carbon in the atmosphere and its effects created an opportunity for the trade of carbon credits both in and outside regulated areas (Gurmit 17). Consequently, a system of carbon trading was created under the umbrella of Kyoto protocol. In the system, international treaties draw quotas on the quantity of greenhouse gases that a country should emit. This in turn, set quotas for the business. Carbon credits and carbon offsets were launched in an attempt to make the trade more attractive.
They also intended to encourage firms to be more cautious about the environment when conducting their business. A tone of carbon credits allows a corresponding value of carbon dioxide or other greenhouse gases to be discharged in the atmosphere. Businesses that exceed their quota must buy carbon credits to compensate for their excess emission (Taibbi, Bubble 6). On the other hand, businesses that consume less of their allocated quota can sale their excess carbon credits. Exchange of carbon credits between businesses is a global phenomenon. The trade is not only limited to business, but also other players are free to buy and sell credits internationally at prevailing market prices. Currently, there are two centers for exchanging carbon credits like Chicago climate exchange and Europe climate exchange (Taibbi, Bubble 6).
WHY CARBON CREDIT CONCEPT AND HOW CLOSE IT IS TO IMPLEMENTATION
Today, the effects of global warming stand in the face of life on earth. Excess carbon dioxide has led to tremendous changes in the weather leading to many adverse effects. Generally, the cost of global warming is phenomenally high. Proponents of green environment and other organizations identified carbon dioxide as the main greenhouse gas responsible for global warming. Businesses where identified as the leading emitters of carbon dioxide and there was a need to regulate this trend (Taibbi, Bubble 6). Under the auspices of the United Nations, the Kyoto protocol was born to mitigate the effects of global warming. The treaty was signed by most countries with the intention to address and reduce greenhouse gas emission that has led to global climate change. Under the protocol, it is mandatory for commercial entities emitting more than the required levels of carbon dioxide to cut down to prescribed levels. Alternatively, a business producing more carbon can buy extra credits or pay a certain charge in compensation referred to as a carbon tax (Gurmit 45).
The concept was official in place from 2005, and was meant to lower the carbon footprint to acceptable levels on a voluntary basis. There were no structures to enforce this concept globally even though countries voluntarily joined and ratified the Kyoto protocol. Carbon credit concept met some challenges even though most organizations especially in Europe and the United States buy and sale carbon credits. Governments are unwilling to fully enforce this concept because it might harm their economies. There is many political questions surrounding the whole concept of carbon trading and this has significantly reduced the effectiveness of the treaty. Few changes have been realized be in general terms the amount of carbon dioxide emission into the atmosphere is on a steady rise.
POSSIBLE CAUSES AND EFFECTS OF CARBON CREDIT CONCEPT
Carbon credit concept has the potential to open a completely new chapter of businesses. People in developing countries especially in Africa could benefit more from carbon trade because as it stands, they are the most affected by global warming. However, many places with large consumer class could lose. For instance, people in the United States are heavily indebted. Carbon trade means that goods produced in their country will be more priced to meet the cost of excess credits. It will be difficult for a common person to meet the cost of leaving in the United States and other such societies (Johnson 23).
With good structures, in place to implement the concept of carbon credit to the later, the rate of carbon emission will be reduced significantly (Taibbi, Bubble 6). Businesses will want to adopt environmentally friendly means of production. Eventually, the effects of global warming will reduce.
Carbon offsets and carbon credit are concepts that need to be demystified in non-technical language. It calls for mass awareness on the issues contained in carbon trade to provide future generations with better and cleaner environments. The increased demand for carbon credits and adoption of latest financial instruments for emission trading depict heightened activity in the trade. It can be concluded that carbon-trading systems will be the order of future businesses.