Carbon Trade and Markets Opportunity

Carbon credit (often called carbon offset) is a credit for greenhouse emissions reduced or removed from the atmosphere by an emission reduction project, which can be sold to governments and companies involved in manufacturing, transportation, construction and many more to compensate for the emissions they are generating. It is a permit or certificate allowing the holder, such as a company, to emit carbon dioxide or other greenhouse gases. The credit limits the emission to a mass equal to one ton of carbon dioxide. The ultimate goal of carbon credits is to reduce the emission of greenhouse gases into the atmosphere.

Market Opportunities

Carbon trade and markets opportunities are largely centered on the sale of carbon credits based on market-based mechanism. Globally, there are two main types of Carbon Trading Schemes: Voluntary Carbon Trading (VCT) and the official Kyoto Protocol Carbon Trading.

Mechanisms (URT, 2013). The VCT involves companies offsetting GHGs emissions from their activities and products on a voluntary basis as part of their corporate responsibility. The conditions to participate in the VCT are relatively less stiff, and have no international legal binding requirements. The official forest carbon trading is possible through the Clean Development Mechanism (CDM) of the Kyoto Protocol of the UNFCCC. Under the Kyoto Protocol developed countries, during the period 2008–2012, were required to reduce their emission of GHG by about 5% below their 1990 emission levels. Under REDD+, developing countries would, on a voluntary basis, aim to reduce the rate at which their forests are being lost, and receive compensation in proportion to carbon emissions saved compared to a baseline which would represent the ‘without intervention’ scenario or some other agreed target.

The goal is to allow market mechanisms to drive industrial and commercial processes in the direction of low emissions or less carbon intensive approaches than those used when there is no cost to emitting carbon dioxide and other GHGs into the atmosphere. The reduction in emissions entitles the entity to a credit in the form of Certificate Emission Reduction. Certificate Emission Reduction can be traded in order to allow another entity to fulfil its carbon credit limit so that it can overcome an unfavorable position on carbon credits.