Regarding “carbon credits’’, which one of the following statements is not correct?
- The carbon credit system was ratified in conjunction with the Kyoto protocol.
- Carbon credits are awarded to countries or groups that have reduced greenhouse gases below their emission quota.
- The goal of the carbon credit system is to limit the increase of carbon dioxide emission.
- Carbon credits are traded at a price fixed from time to time by the United Nations environment programme.
Explanation
Option (d) is the correct answer
- A carbon credit (a carbon offset) is a tradable certificate or permit. One carbon credit is equal to one tonne of CO2. Carbon credits can be acquired through afforestation, renewable energy, CO2 sequestration, methane capture, buying from an exchange (carbon credits trading), etc.
- Carbon trading is the name given to the exchange of emission permits (carbon credits). This exchange may take place within the economy or may take the form of an international transaction.
- The Kyoto Protocol approved the introduction of these credits.
- Under the Carbon Credits Trading mechanism, countries that emit more carbon than the quota allotted to them buy carbon credits from those that emit less.
- In Carbon trading, one credit gives the country or a company the right to emit one tonne of CO2. A developing nation, such as India, turns out to be a seller of such credits.
- Carbon credits are traded at various exchanges (Carbon credit prices are traded on an exchange. So, their prices are never fixed) across the world. The Multi-Commodity Exchange of India launched futures trading in carbon credits in 2009.
- Types of Carbon Trading
- Emission trading
- Offset trading
- Emission Trading/Cap-and-Trade
- Sell/purchase: emissions trading allows countries to sell unused emission units to countries that have exceeded their targets.
- Offset Trading/Carbon Project/’baseline-and credit’
- Create: a country can earn a carbon credit by investing some amount of money in projects, known as carbon projects, which will emit a lesser amount of GHGs into the atmosphere.
