Published on January 9th, 2008 | by Stephanie Evans

Carbon Credits in the Fight Against Climate Change

Many of us are concerned about global warming. We’ve done our homework and it reveals carbon dioxide as a main culprit of this international crisis. Research also shows that using less energy is the best way to keep carbon in the ground where it belongs.

Now that we’ve converted to energy efficient lighting and reset the thermostat, what do we do about the carbon dioxide pollution that we can’t reduce so easily?

For some, the answer involves carbon credits…

At $5 per credit, or an average $100 to neutralize your carbon footprint for an entire year, carbon credits are a surprisingly inexpensive and easy way to minimize personal contribution to global warming. Few Americans currently opt to offset, partially because offsets are difficult to buy. Carbon credits are a relatively new and abstract concept—it’s difficult to understand them completely, and it’s tough to invest money in something that doesn’t entirely make sense . . .

Let’s take a closer look at the concept of carbon credits, resulting debates, and some tips for purchasing the most clean, green carbon reductions.

Carbon Cash

Carbon credits weren’t always available for the public to purchase in bite-sized portions. The idea of carbon crediting was established years ago by concerned Power Plant Smokestack Emitting Greenhouse Gases governments that questioned their contributions to climate change. In the early 1990s, the United Nations started regulating global warming gas production using a cap-and-trade system.

For example, Germany asked its steel industry to cap its carbon emissions at 16% below 1990 levels. Any specific steel plant could meet this goal by cutting energy use directly or by trading carbon allowances with other industries. A power plant, for example, might reduce its pollution even more than the legal limit requires, giving it the opportunity to sell spare allowance to a delinquent steel manufacturer.

The price of the sale is determined by the number of tonnes of carbon allowance that changes hands, while each tonne is termed a carbon credit. This system is designed to drive environmentalism using an economic force—reducing emissions creates profits and hurting the environment costs money.

In this system, beating the limit requirements is not the only way for a company to produce carbon credits. A full-grown tree stores about 1 tonne of carbon in its tissues, so building a wind farm reduces the amount of carbon dioxide created by power plants. Basically, any project that frees the atmosphere of greenhouse gases can generate carbon credits.

But before we give the idea a big "hurrah" for saving trees and reducing the price of clean energy, we should consider some of the downsides of this controversial system.

The Debate

Whether you’re an individual or a giant corporation, there are a few carbon credit considerations that fuel an ongoing debate:

First of all, carbon credits are difficult to verify. We all know that building a power plant will put greenhouse gases into the atmosphere, but if a wind farm is built in lieu of a coal plant, should the wind farm producer be given all the credit for reducing the emissions? How do we know that the customer wouldn’t have purchased windmills instead of coal anyway?
Before carbon credits existed, green manufacturers successfully sold wind and solar generators to environmentally conscious companies. The added economic reward of carbon credits isn’t responsible for all of the carbon-free technologies on the market today, but differentiating between true emissions reductions and false ones is not an easy task. Tree pose verification difficulties as well:
- Calculating the amount of carbon dioxide inhaled by a tree is rough at best, and tree-based credits come with no guarantee that the tree will stay alive.
- A dead tree releases its carbon right back into the atmosphere. Some studies even show that planting forests exacerbates global warming, since trees are a dark color and dark colors trap more sunlight.
- In addition, hiring a third party to clean up our pollution is irresponsible compared with restricting our fossil fuel addiction in the first place.
This brings us to the second problem: Carbon credits are not as beneficial as reductions. When a concrete manufacturer develops a more efficient production method:
- Global warming gases stay out of the atmosphere
- Mercury, NOx (nitrous oxide), ozone, and other pollutants are prevented from contaminating the air
- The practice of energy conservation puts us on a road to carbon neutrality—the end goal of the whole concept.
Some point out that by allowing companies to purchase carbon offsets, we inadvertently give them permission to continue wasting energy carelessly. A number of environmental organizations such as Greenpeace, WWF, and Friends of the Earth express hesitation with the concept of carbon offsets for this reason.
Another problem with the offsetting system relates to potential fluctuations in value. The value of carbon credits is determined by firms that set a cap on the monetary equivalent of a carbon tonne/ton. If that cap is set too high, the carbon credit’s value is reduced and it can rapidly decline with fluctuations in the economic climate. This presents a potential problem in that it becomes more cost effective for corporations to buy offsets rather than actively reduce emissions or invest in alternative technologies.

How It Comes Together

Just because there are downsides to the process doesn’t mean that carbon credits can’t help us to heal the planet. The Kyoto Protocol has turned the carbon credit into a mainstream term that is recognized all around the globe. With so many people involved in the buying and selling of these abstract allowances, governments and institutions are developing strict regulations that separate quality credits from phony ones. Laws will prevent companies from meeting reduction goals through the purchase of offsets alone.

As time passes, we will gain a better understanding of the problems faced by emissions trading and efforts are made to close loopholes, verify projects, and generally guarantee a true environmental benefit from a carbon crediy.

Although the U.S. does not participate in the Kyoto Protocol, several U.S. states and cities are capping their greenhouse gas emissions and you can choose to participate. The Chicago Climate Exchange (CCX) is an organization that imparts legally binding allowances to American companies wishing to reduce their carbon emissions. Here’s how it works:

Members meet goals by reducing carbon production or by purchasing credits through the CCX.
These emissions reductions, which are not ordered by federal law, are termed voluntary reductions. This is the type of credit you buy to reduce your personal emissions, which differ in verification process from the Kyoto-accepted certified emissions reductions (CERs).

Since there are so many types of carbon offset projects, criteria for registration with the CCX vary. All projects must first obtain initial verification from an independent, CCX-approved third party, and once registered, annual reports are required for the duration of the project.

Sign Me Up

A few companies in the U.S. are purchasing credits from the CCX for resale to individuals. This is a great opportunity for those seeking to go green to contribute to Car Pollution, One Cause of Global Warming the environment, since it is difficult for many people to afford emissions-reducing technologies like solar panels and wind turbines. Here’s how it works:

Instead of, or in addition to, attempting to achieve carbon neutrality on your own, you can purchase carbon credits to offset your emissions.
Since the offset has already been sold to you, a CCX member is prevented from purchasing the credit and is forced to meet reduction targets by decreasing overall emissions.
The net result: your carbon credit forces affluent companies to install energy-saving technologies on your behalf.

To learn more about purchasing carbon credits as a way to reduce personal emissions, click on over to How to Shrink Your Carbon Footprint with Carbon Credits.

Be ready though—the purchase can be difficult to make since you will not see a direct, tangible result from spending your money. Aside from an official-looking piece of paper and a sticker to display on your car, you’ll have to accept on faith that the environment benefits and that our future is just a tiny bit more secure thanks to your contribution. And if enough people purchase carbon credits, it may prompt the next round of politicians to join the fight against global warming . . .