During a conversation the other day, I realised I know very little about carbon credits and how that whole system works.
My stupidly simplistic understanding of the process is:
1) A carbon weight is assigned to a process, material use etc.
2) An entity is allowed a certain amount of carbon emissions per cycle, which must be purchased through a permit system.
3) If the carbon emission allocation is exceeded a fine is payable and additional carbon emission permits must be purchased to cover the excess.
4) If the entity performs below the permitted allocation of carbon emissions, the excess credits can be traded (for cash?) to other entities that have failed to stay within their allocated permit limits.
Industrialised countries are the baddies here because they emit far more greenhouse gases than developing nations do. Developing nations can therefore sell their credits to those entities at a possible profit.
My question is, where does the “fine money” go to? And does the carbon trade just cost the offenders money or are their businesses activities faced with suspension until they actively put in place methods to lower their emissions? Ok yes, I’m being a little exaggerative, but I’m thinking big polluters here. Is there a maximum threshold where governments say “Whoa, too many tonnes of carbon coming from your factory, fix it in 12 months or face temporary closure”? Does the “Carbon Emissions Commission” have any authority here (if such a thing exists)? I understand it will be a gradual process to ensure companies perform ‘greener’, but what timeline is specified? I realise that development and progress must continue in order for global economies to keep the world turning and technology improving, but isn’t it pointless if the end point is a polluted, uninhabitable planet?
Isn’t the carbon credit trade just a game of monopoly anyway? As far as I can tell, these credits are just circulated between countries and no real value has come from it. Or has it? It could be I’m very uninformed about the outcomes of the game. In my stupidly simplistic understanding, I would have thought that the fines collected by now would have already financed the planting of several Carbon Credit Forests.
Some sources of information I used:
- Here is some information how the Kyoto Protocol is meant to work. The wiki page has more detailed information.
- Here is some information on how carbon trading works.
- Here is some information on how carbon offsets work.
I’d like proof of the tangible positives of the Carbon Emissions Trade.