Climate change challenges present organizations (e.g., companies, corporations, nongovernmental organizations (NGOs)), communities, and citizens with the need to redefine current views on corporate social responsibility (CSR) from a voluntary luxury as being a necessity.
By midcentury, climate challenges are expected to seriously disrupt business-as-usual and change the way citizens live their lives around the world.
Indeed, many countries are already experiencing the vanguard of challenges and many organizations are planning for the projected risks they will face (e.g., limited clean water, expensive and unreliable energy). With our service offering for Carbon Credit and Trading, Deosi emphasizes our commitment towards a green and clean planet, and improving the quality of life for all the human beings living on Earth.
A carbon credit is a tradable permit or certificate that provides the holder of the credit the right to emit one ton of carbon dioxide or an equivalent of another greenhouse gas. The main goal for the creation of carbon credits is the reduction of emissions of carbon dioxide and other greenhouse gases from industrial activities to reduce the effects of global warming. a carbon credit is an instrument that represents ownership of one metric tonne of carbon dioxide equivalent (using CO2 as a unit to measure different greenhouse gases) that can be traded, sold or retired. In this way, if a business is regulated by a cap-and-trade system, it will have the benefit of allocating, trading, selling or holding a carbon credit if it managed to keep its emissions below the top limit.
On the other hand, if a business has used more than what it has been allocated with; it will need to purchase a credit to be in compliance or to pay heavy fines instead. Therefore, carbon credits turn into a tradable asset that allows measuring a reduction in polluting greenhouse gas emissions.
Carbon trades are regulated by governments or international organizations responsible for setting a limit/cap on the amount of GHG (in a CO2 unit) that can be released. Businesses are therefore allotted with a specific amount of carbon they can emit annually. If they exceed this limit, they need to purchase carbon credits or carbon offsets. If they don’t exceed the cap, they can sell the unused carbon credits or businesses that need them.
According to the World Bank45 national and 25 sub national jurisdictions
According to the World Bank45 national and 25 sub national jurisdictions had put or were about to put a price on carbon, in what would reach 11 gigatons of CO2, the equivalent to ~20% percent of global GHG emissions.
This is a significant increase compared to the 8 GtCO2 (15%) emissions covered in 2017. As for the global price of carbon, it goes from US$1/tCO2 to a maximum of US$139/tCO2. And again, in 2018 they increased compared to 2017, especially due to the growth of the European Union Allowance (EUA) prices from €5/tCO2 to €13/tCO2.
Parties with commitments under the Kyoto Protocol have accepted targets for limiting or reducing emissions. These targets are expressed as levels of allowed emissions, or assigned amounts, at over the 2008-2012 commitment period. The allowed emissions are divided into assigned amount units (AAUs).
Emissions trading allow countries that have emission units to spare - emissions permitted them but not "used" - to sell this excess capacity to countries that are over their targets.
Thus, a new commodity was created in the form of emission reductions or removals. Since carbon dioxide is the principal greenhouse gas, people speak simply of trading in carbon. Carbon is now tracked and traded like any other commodity. This is known as the "carbon market."
Other trading units in the carbon market
More than actual emissions units can be traded and sold under the Kyoto Protocols emissions trading scheme.
The other units which may be transferred under the scheme, each equal to one tonne of CO2, may be in the form of:
A removal unit (RMU) on the basis of land use, land-use change and forestry (LULUCF) activities such as reforestation
An emission reduction unit (ERU) generated by a joint implementation project
A certified emission reduction (CER) generated from a clean development mechanism project activity
Transfers and acquisitions of these units are tracked and recorded through the registry systems under the Kyoto Protocol. An international transaction log ensures secure transfer of emission reduction units between countries.
The commitment period reserve
In order to address the concern that Parties could "oversell" units, and subsequently be unable to meet their own emissions targets, each Party is required to maintain a reserve of ERUs, CERs, AAUs and/or RMUs in its national registry.
This reserve, known as the "commitment period reserve", should not drop below 90 per cent of the Party's assigned amount or 100 per cent of five times its most recently reviewed inventory, whichever is lowest.
Relationship to domestic and regional emissions trading schemes
Emissions trading schemes may be established as climate policy instruments at the national level and the regional level.
Under such schemes, governments set emissions obligations to be reached by the participating entities. The European Union emissions trading scheme is the largest in operation.