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What is the Carbon Trade?
The global carbon market is booming, and it’s expected to reach $22 trillion by 2050. Yeah, I bet most people didn’t know that carbon emissions are bought and sold like commodities in a market, so here’s the rundown: 👇 👇
Kyoto, Japan:
In December 1997, 38 industrialised countries met in Kyoto to plan for reducing their greenhouse gas emissions. This was known as the Kyoto Protocol (precursor to COP26 back in Nov-21). They came up with the idea of the Carbon Trade. Carbon is given an economic value, if a nation/company buys carbon, it’s buying the rights to burn it. The better you are at storing carbon, the more you can charge $$ for it. Ie. A nation that reduced its emissions more than they pledged would receive credits, which they can sell to nations that exceeded their carbon limits. Essentially, it’s the buying and selling of the rights for a nation/company to emit CO2.
The Give:
This incentivises nations/companies to reduce their CO2 emissions to be rewarded in credits that can then be sold. It also encourages nations/companies to innovate and reduce their CO2 emissions to avoid buying carbon credits. It’s speaking in the corporate language by making emission reductions profitable ie. going green💚 for the greens 💵.
The Take:
However, like with any other market, it can be exploited. Carbon prices are different for different countries. Hence, companies could set up their factories somewhere with cheaper carbon credits, and still claim to be carbon negative in their home country. They could even set up a renewables plant in their home country to sell clean energy, carbon credits and an eco-friendly image. So, when nations/companies claim to be zero carbon or carbon negative, it comes with a huge asterisk.
The value of global carbon markets grew by 20% in 2020, marking its 4th year of consecutive growth. While carbon trading may have its merits, it still involves finding a compromise between profit, equality and ecological concerns.
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