Bruce Scott
Unless the sea floods your dining room, or the coal-fired power plant next door belches out dirty smoke for you to inhale, it is difficult to appreciate what all the fuss is about regarding Green House Gases (GHG) and global warming. And, what is a carbon credit anyway? Let’s try a simple explanation.
Imagine you boil your jug to make a cup of tea. The energy used to boil the water – in this case electricity – has to be generated somewhere: let’s say in a coal-fired plant. Burning the coal to generate the electricity for your tea creates carbon emissions (dirty smoke), or a carbon deficit.
For arguments sake, let’s say the carbon emitted was 1 tonne. To balance the carbon ledger, these emissions have to be compensated for, or offset, by purchasing a carbon credit of 1 tonne.
How are these carbon credits created? Well, the electricity generator above decides to build a wind farm to mitigate emissions. Now, wind is used to generate electricity instead of coal. The power company applies to an international verifier that agrees – yes, you have reduced carbon emissions because instead of coal, you are now using wind to generate electricity.
The power company is awarded credits for completing this process which they can sell on the open market, making the wind farm project financially viable. Hence, when you buy a carbon credit you are actually helping to pay for projects like wind farms.
The power company has cashed in twofold. It no longer needs to balance its carbon ledger by buying carbon credits to cover its coal usage and, it can now recover some of its wind farm investment by selling credits.
So, the sea will no longer flood my dining room? – Well, no, we are already past the point of no return for some island nations, that’s why the United Nations is trying to get countries working together to stem the flow of damage from excess GHG emissions. But, you will have cleaner air thanks to zero emissions from the wind farm.
And, this is what The Kyoto Protocol, emissions trading schemes, carbon credits etc, are all about. They set out – via market mechanisms - to punish polluters and reward innovators of new clean technology.
Nothing is perfect, but it’s pretty clear we need some kind of framework to at least try and hold back the sea from flooding any more islands.
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