What are carbon commitments?
Certain governments, which have accepted mandatory CO2 emission cuts (under the Kyoto Protocol), set annual targets for their industrial sector, which is then divided across various sectors. Each factory in these countries knows exactly how much CO2 it can emit. CO2 emissions need to be cut to combat global warming and climate change caused by release of such earth-warming (or greenhouse) gases. At last count, 36 developed countries had made such commitments.
What is carbon trading?
Each factory or plant in the 36 countries is given emission allowances or permits (one permit is for one tonne of CO2 or equivalent of other greenhouse gases emitted). Depending on the allowance, companies and traders can then buy or sell these permits. If a company overshoots its individual target, it can buy a “permit” from another, which has undershot its target. This is known as emissions trading.
What are carbon credits and who buys these?
If a company in a developed country overshoots its target, it can buy carbon credits to meet its target: carbon credits are generated by companies in developing countries that reduce greenhouse gas emissions. This comes under the Clean Development Mechanism (CDM) defined by the Kyoto Protocol. A project has to be verified and registered by the CDM executive board in Bonn before it can generate these credits and sell them. India is currently the country with the highest number of registered projects. The CDM has a twofold objective: one is to generate carbon credits (also known as certified emission reductions; the other is to address the need for sustainabledevelopment in developing countries. —Padmaparna Ghosh