The latest news on carbon credits



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Photo courtesy of Azure Bleu at Flickr.com.

The Kyoto treaty is in the news again as the Obama administration considers implementing a cap and trade system for carbon dioxide. It turns out that a lot of participating countries have fallen short of their Kyoto commitments, and are now required to purchase approximately $46 Billion of carbon credits to make-up for surplus CO2 production. This could mean that the price of carbon credits is about to spike upwards from their current low levels.

So, what exactly is a cap-and-trade system?
Cap and trade is a regulatory framework for controlling the emission of carbon dioxide and other pollutants that affect the climate. It is one of several proposed systems, with the largest alternative being a carbon tax. The cap in cap-and-trade refers to a limit set on the level of emissions. This cap can be company specific, region specific, national, or international. When participants spend more than their allotment, they can trade credit with other participants who haven’t produced as much as their allowed.

What are carbon credits?
Carbon credits are warrants that represent carbon neutralizing behavior (ie; maintaining a forest, sequestering carbon underground, or breaking down greenhouse gases). In some countries, factories and power plants are required to purchase carbon credits that offset their pollution. These vouchers are used to fund the development of clean technology and conservation, and they also make green business practices more competitive by putting a price tag on externalities. A cap and trade system promotes land conservation by placing a value on pristine wilderness areas. In turn, this reduces carbon emissions by deterring development.

Many different companies offer carbon credits and carbon offsets. If you’re interested in purchasing some for your personal use, there are plans that you can use to neutralize the impact of a plane trip, counterbalance your home’s expenditures, or to offset your daily commute. Here’s a price survey of various companies that offer carbon credits.

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Photo courtesy of Dianne Pike at Flickr.com.



There are concerns with how carbon credits are computed. Critics argue that carbon credits are often miscalculated, that they’re rewarded for projects that were going to be built anyway, or that the expense is not justified by the results. A recent report by the US General Accounting Office offers some support to these criticisms. Projects that have applied for carbon accreditation under the UN Clean Development Mechanism (CDM) were found to have serious problems. Several of these projects involved displacing Chinese farmers to build hydroelectric dams, and construction on some of the dams had even been underway before the project managers asked for carbon credits.

The end users of carbon credits are increasingly demanding third-party validation. In order for carbon credits to be more than modern-day indulgences, there are some important stipulations that need to be met. The carbon savings must be measurable, unique, and independently verifiable. This prevents unscrupulous carbon dealers from selling non-existent credits or selling the same credits over and over again. In the terminology of the Clean Development Mechanism, only actions that provide “additionality” are eligible for carbon credits:

If I buy carbon offsets, I make the implicit claim that I forgo reducing my own emissions (i.e. I still fly) but in exchange I pay someone to reduce their emission in my stead. If I buy carbon offsets to “neutralize” the emissions I caused during air travel from someone who would have reduced their emissions anyway, regardless of my payment, I, in effect, have not only wasted my money, but I also have not neutralized my emissions.

Currently, the majority of projects applying for CDM accreditation involve hydroelectricity. There are only a finite number of suitable rivers in the world though, so future savings will have to come from new techniques and green technologies. Microturbines fueled by waste are one of the largest areas of potential growth, and US companies are spearheading development in that area.

San Antonio recently became the first city to deploy a power plant that uses methane from sewage to generate power. Burning this renewable resource is a clean solution, because methane has more than 20 times the impact on climate change that carbon dioxide does. There’s no word yet on whether San Antonio is applying for carbon credits on this project, but it’s certainly more useful than methane flare projects that are already cashing in.

Several states are pursuing a different tactic to reduce their carbon footprint; they’re attempting to reduce overall power use. A California law is now in effect that requires all state facilities to reduce their energy use by 20%. There have been some unexpected results. In addition to new systems at government offices and service centers, Corrections facilities around the state have also been forced to go green. California’s not alone; many prison facilities nationwide are adapting energy saving technology. From prison gardens that use compost to water boilers that burn wood waste, cleantech is saving thousands of dollars and introducing prison populations to some innovations that were originally developed for the Hollywood elite. With state budgets feeling a pinch, how long do you think it will be before San Quentin starts selling carbon offsets?



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Photo courtesy of MrGluSniffer at Flickr.com.



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