What are carbon credits and how do they work?
The Kyoto Protocol laid the foundations for offsets as a way for governments and private companies to obtain tradable carbon credits in a market. But how does this process work? Núria Rambla, CEO Executive Assistant at 11Onze, explains in a new episode of Energia.
Reducing carbon dioxide emissions will play a fundamental role in stopping the greenhouse effect. In this sense, the Kyoto Protocol contemplated an economic instrument, known as carbon credits, whereby organisations that cannot meet their emissions quota can offset it by purchasing emission reductions certified by the Clean Development Mechanism (CDM).
Therefore, pollution limits are applied to certain companies, which are reduced year by year. As Rambla explains, “basically they are pollution permits, and companies that do not implement improvements in their production will have to buy credits on the carbon market”.
Compliance market and voluntary market
There are two types of carbon credit markets. On the one hand, the compliance market, whose members are large corporations or governments from rich countries, and on the other, the much smaller voluntary market, where companies and other governments buy carbon offsets to mitigate their own emissions.
In this context, companies have the possibility to invest in carbon offsets, either “to clean up their image, or out of environmental awareness”, Rambla says. This is a process that spurs investment in energy transition projects in the Third World. However, as the CEO’s assistant warns, it has to be assessed on a case-by-case basis to avoid it being simply a greenwashing business.
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