How the Carbon Credit Programs turned into a global response to Climate Change: Opinion

Written by Shalin Sheth, Founder & Managing Director, Advait Infratech Limited

Climate change is a pressing global challenge, driven primarily by the emission of greenhouse gasses that contribute to global warming. In response, various strategies and initiatives have been developed to combat this critical issue. One such approach, carbon credit programs, has gained considerable attention for its potential to mitigate climate change. This article delves into the concept of carbon credit programs and their significant global impact on climate change.
Understanding Carbon Credits
Carbon credits aim to reduce greenhouse gas emissions by providing an economic incentive for emission-reduction activities. Each carbon credit represents the right to emit one ton of carbon dioxide or its equivalent in other greenhouse gasses. To put this into perspective, a single carbon credit is equivalent to the emissions generated by a 2,400-mile car journey.

Companies or nations are allocated a specific number of carbon credits and can trade them, thus contributing to the overall reduction of worldwide emissions. In essence, carbon credit programs simplify the trading of emissions, with a primary focus on carbon dioxide.

Global Adoption and Prevalence
In the United States, cap-and-trade programs, a form of carbon credit system, remain a subject of controversy. Nevertheless, 11 states have embraced market-based approaches to reduce greenhouse gas emissions. Notably, 10 of these states formed the Regional Greenhouse Gas Initiative (RGGI), a collaborative effort in the Northeast.

This program aims to address emissions through a regional approach, emphasizing cooperation and accountability. A recent development expected to impact the carbon credit market is the Inflation Reduction Act, signed into law in August 2022. This landmark legislation aims to reduce the deficit, combat inflation, and decrease carbon emissions.

It includes provisions to reward high-emitting companies that store their greenhouse gasses underground or use them in manufacturing processes or oil recovery. These rewards come in the form of expanded tax credits, encouraging emissions reduction practices.
The United Nations’ Intergovernmental Panel on Climate Change (IPCC) introduced a carbon credit proposal in the 1997 Kyoto Protocol.

This agreement set binding emission reduction targets for signatory countries. The Marrakesh Accords further outlined the rules for implementing the system.

The Kyoto Protocol divided countries into two groups: industrialized and developing economies. Industrialized countries, known as Annex 1, had their emissions trading market. Countries that exceeded their emission reduction targets could sell surplus credits to nations that did not meet their Kyoto goals through Emissions Reduction Purchase Agreements (ERPAs).

Developing countries participated in the Clean Development Mechanism, where they earned carbon credits known as Certified Emission Reductions (CERs) for supporting sustainable development projects. The first commitment period of the Kyoto Protocol concluded in 2012, with the United States having already withdrawn in 2001.

The Paris Climate Agreement, signed in 2015, revamped the Kyoto Protocol and included emission standards and emissions trading provisions. Despite the U.S. withdrawing from the agreement in 2017 under President Donald Trump, it rejoined in 2021 under President Biden.
The Glasgow COP26 Climate Change Summit in November 2021 yielded a significant agreement allowing nearly 200 countries to implement Article 6 of the 2015 Paris Agreement. This provision permits nations to work toward their climate targets by purchasing offset credits
representing emission reductions achieved by other countries.

The agreement encourages investment in initiatives and technology aimed at protecting forests and establishing renewable energy infrastructure to combat climate change. Several provisions, including zero taxes on bilateral offset trades, the cancellation of 2% of total credits, and a fund for developing countries to combat climate change, were also agreed upon.

The Indian Carbon Market
In India, the Clean Development Mechanism (CDM) has supported the development of projects eligible for voluntary carbon credits. However, the Indian carbon market is still in its infancy compared to more developed markets like the United States.

Establishing a transparent and vibrant carbon market in India requires national legislation, setting up market systems, and legitimizing the National Carbon Registry and National Carbon Market to fulfill the country’s commitments under its Nationally Determined Contribution (NDC).

In response to mounting apprehensions about climate change, Advait Infratech providing end-to-end carbon neutrality services acknowledges the pressing need to confront carbon emissions and presents a comprehensive suite of services, including carbon credit consultation and holistic solutions for achieving carbon neutrality and net-zero emissions.

Conclusion
In conclusion, carbon credit programs are a crucial tool in the global fight against climate change. These programs incentivize emissions reduction and support sustainable projects, making substantial contributions to environmental conservation. Despite facing challenges and criticism, carbon credit programs play a vital role in helping the world achieve its climate goals, contributing to a greener, more sustainable future. Continued support and improvement of these programs are essential as we collectively address the urgent threat of climate change.