What are carbon credits?

Question

I was at Whole Foods today, and they carry a chocolate bar called Climate Change Chocolate.

Apparently, when you buy this bar, the company will buy 133 carbon credits to offset what one person has used that day.

At $4.99 a bar, they better be something special!

What exactly is a carbon credit? What do they do?

I feel a little bit silly asking this, but I recently decided to try to do my part to save the planet... I mean... it's the only planet with chocolate on it!

Answer 1

Basically, economics dictates that everything better have a price put on it in the market, which determines its value. If emissions have no cost, polluting firms have no incentive to reduce their emissions. Unless, that is, these emissions get a 'cost' tag put on them, and this implies taxing the polluter because now he can pollute only up to the amount he can afford to pay for.

So carbon credits are used in international emissions trading schemes. They work by putting a cap on total annual emissions and letting the market assign a monetary value to emissions through trading. Credits can be bought and sold between businesses in international markets at the prevailing market price.

So if I'm a firm that has produced less emissions than the limit assigned to me, I can sell the remaining carbon units (that I'm allowed to emit as pollution) to some other firm that is going to exceed its carbon limit.

Ultimately, the way I see it, carbon credits don't do much good for the environent at least in the short run. But by rewarding voluntary emission-control (by letting them sell their surplus credits) and taxing excessive polluters (by making them buy credits in order to function), you're basially providing an incentives-framework which, according to economics logic, should bring down the pollution levels. Because once you treat pollution as an input for a firm (for which it has to pay), obviously the firm will continue production only if its expected revenues match up to the input cost it is bearing (which is hiked up further by having to buy credits).

Answer 2

Carbon emissions can't be regulated at this time, so it is a bit of BS. However, in the near future, it may help regulate emission.

http://en.wikipedia.org/wiki/Carbon_cred...

"The mechanism was formalized in the Kyoto Protocol, an international agreement between more than 170 countries, and the market mechanisms were agreed through the subsequent Marrakesh Accords."

Simple explaination;

each country is allocated a quota of carbon emissions it's allowed to produce, in turn the country then sets up a quota on individual businesses using their given quota.

so if a company produces less than it's quota, it can trade it's credits to a company that has gone over it's quota.

this only make sense within the agreement. it limits the total emissions and discourages companies from going over the limits as credits are expensive to buy.

in the real world, what happens is, (eg.)

internatonal company A has 20 credits only uses 5, sells 15 to company B where credit are really expensive. (traders make a huge chunk of comm.)

company A then moves it's production to country X where it has 1000 credits and continues poluting at a global level.... or even worse they move production to a country that is not capped at all.

the problems with the carbon exchange definately exsist. it's a move in the right direction, but it's interesting to note that several countries responsible for a large proportion of global emissions (notably USA, Australia, China and India) have avoided mandatory caps.

another question, i've always had was how are quotas decided... on it's inception, there was a period of carbon credits being almost worthless when companies were given more credits then the know what to do with....

if you buy the carbon credits concept and want it to work, you'd be better off boycotting products produced in countries and companies who have not signed the agreement.

Answer 3

It is supposed to be money that is used for a conservation cause.  I have a suspicion it is a way for people with money to buy their way out of any real green efforts.

Answer 4

Carbon credits are supposed to be used to offset your carbon dioxide emissions. They are used to buy solar, or wind power, or something similar.

Really, they're a bunch of c**p, because you're still polluting the environment either way. But at least some money is going to alternative energy.

Unfortunately, it makes some people think that they can just go crapping up the earth, and buy their way out of it.

Answer 5

i think carbon credits can be applyed in all applications if you are taking about relating to nutrtrient sense the cycle of carbon in living being carbon dixoide is fixed by photosynthesis to form organic nutrition and restored by inorganic  stae like respiration , proplasmic decay . any thing that is in a process creates a credit                - or +  2/  tracer studies / isotonic  conditions  arch,geo logical dating

Answer 6

Everyone's already explained what they are, but I'd like to elaborate a bit about why they get such bad press.

Carbon (CO2 actually) credits are ONLY effective if they make something happen that wouldn't have happened if not for that credit.

So a credit to help an already green thinking person buy a solar hot water heater is really not effective at all, because that person would probably have bought it anyway. So there's no actual CO2 saved.

But if that person had NO interest in doing their bit for the environment, and was ONLY interested in getting a SHW system to save money and without the carbon credit to help pay for it would not be financially viable. So then if that person decided not to get the system (and then just use a fossil fuel powered electric system for example), then the credit would be very valid, as the person paying the carbon credit really DID offset their own CO2 generation.

Tree plantings are similar(ish). A CO2 credit going into planting plantation timber for eventual use as timber and/or paper has far less value as an offset as a program of native vegetation replanting. And even then the credit is only good if the plants don't later get burnt/chopped/cleared... So it needs to be in a carefully managed national park or similar.

I agree carbon credits can be VERY murky waters, but they still have their place if used correctly, and even then should ONLY used as an absolute last resort (reduce your actual production of CO2 wherever possible first!)

Hope that helps, and well done on deciding to do your bit. Great to have you on board. :O)

Answer 7

Al Gorr's "carbon credits" are an effort to lessen the effects of climate change and influence the general opoulation by encouraging them to purchase goods that have made no hamrful footprint on the environment - carbonwise, that is. For example, the carbona and energy used to haul a 747 across the Atlantic, full of chocolate bars - not very environmentally friendly. Buying carbon credits offsets greenhouse gas emissions, basically. But thats what "they" say, and I'm a bit of a skeptic myself...

Carbon credits and the climate change issue are strictly disputed topics. The credits have often been the source of criticism. Criticism - as in jaxin's answer.