Down To Earth (October 1-15 2023)

Carbon Trade and Emission Control


  • As per the assessment of Centre for Science and Environment (CSE), India generates one-fifth of the world’s carbon credits and is at the forefront of carbon investment.


  • Buying and selling of carbon credits is seen as an important way to combat climate change. The concept works by assigning credits to projects that reduce greenhouse gases.
  • These credits, measured in tonnes of carbon dioxide-equivalent (CO2e), then get priced and traded.
  • People and businesses that wish to offset the emissions generated by their activities can buy these credits and ‘neutralise’ the carbon footprint.
  • A voluntary carbon market has grown at a record pace in the past decade. In this marketplace, emission-reducing projects are registered, verified and validated, and carbon credits traded in the hope that money from the transaction would help mitigate emissions.

Types of carbon markets:

  • Compliance markets: These are created as a result of any national, regional and/or international policy or regulatory requirement.
  • Voluntary carbon markets (national and international): These refer to the issuance, buying and selling of carbon credits, on a voluntary basis.
  • The current supply of voluntary carbon credits comes mostly from private entities that develop carbon projects, or governments that develop programs certified by carbon standards that generate emission reductions and/or removals.

Carbon Trade Agreements:

  • These are for the sale of carbon credits in order to reduce total emissions.
  • Several countries and territories have started carbon trading programs.
  • Carbon trading is adapted from cap and trade, a regulatory approach that successfully reduced sulphur pollution in the 1990s.
  • These measures are aimed at reducing the effects of global warming but their effectiveness remains a matter of debate.


Carbon Trading Agreement Post Glasgow COP26:

  • Rules for a global carbon market were established at the Glasgow COP26 climate change conference in November 2021, enacting an agreement first laid out at the 2015 Paris Climate Agreement.
  • The agreed-upon framework, known as Article 6, will comprise a centralised system and a separate bilateral system.
  • The centralised system is for the public and private sectors, while the bilateral system is designed for countries to trade carbon offset credits, helping them meet their emission targets.
  • The new rules allow participants to use previous credits created between 2013 and 2020, prompting fears that they could potentially saturate the market and put downward pressure on prices.
  • Under the new agreement, those who create carbon credits will deposit 5% of proceeds generated into a fund to help developing countries tackle climate change. Also, 2% of credits will be cancelled to ensure an overall reduction in emissions.


  • However, there is no ‘official’ carbon market established, and the global community is still discussing the rules that will govern such trade.
  • On the other hand, proponents of the framework say that it creates financial incentives for countries and companies to create emission-reducing technology and initiatives, such as mechanical carbon capture systems and forest planting—all of which will help reduce carbon levels in the atmosphere.


Carbon Market and Greenhouse Gas Emissions


  • Voluntary carbon market is growing rapidly which is driven by private entities, mostly industries and businesses.


  • Carbon market has the potential to unlock billions of dollars for countries in the Global South that need financing to transition to a low-carbon energy system and to ensure socio-economic development of their communities.
  • It is clear that the world is failing by many marks to reduce greenhouse gas emissions.
  • The climate change crisis has now reached every country, and extreme weather events are costing all economies.
  • This market would put a price on every tonne of carbon dioxide or the equivalent greenhouse gas avoided, reduced or sequestered, which can then be used to offset emissions of companies and countries.

Do you know?

  • The idea of carbon credit began in the first decade of the 2000s, after the Kyoto Protocol, set up under the UN Framework Convention on Climate Change (UNFCCC), entered into force.
  • Countries agreed to set up the Clean Development Mechanism (CDM) for the purchase of carbon credits from developing countries. But with the end of the Kyoto Protocol, this market dried up.
  • It was replaced by an unregulated global market of buyers and sellers, called the voluntary carbon market.


What is net zero?

  • It means cutting greenhouse gas emissions to as close to zero as possible, with any remaining emissions re-absorbed from the atmosphere, by oceans and forests for instance.

Why is net zero important?

  • The science shows clearly that in order to avert the worst impacts of climate change and preserve a livable planet, global temperature increase needs to be limited to 1.5°C above pre-industrial levels.
  • Currently, the Earth is already about 1.1°C warmer than it was in the late 1800s, and emissions continue to rise.
  • To keep global warming to no more than 1.5°C (as called for in the Paris Agreement) emissions need to be reduced by 45% by 2030 and reach net zero by 2050.

How can net zero be achieved?

  • The energy sector is the source of around three-quarters of greenhouse gas emissions today and holds the key to averting the worst effects of climate change.
  • Replacing polluting coal, gas and oil-fired power with energy from renewable sources, such as wind or solar, would dramatically reduce carbon emissions.
  • It calls for nothing less than a complete transformation of how we produce, consume, and move about.

Is there a global effort to reach net zero?

  • More than 70 countries, including the biggest polluters – China, the United States, and the European Union – have set a net-zero target, covering about 76% of global emissions.
  • More than 3,000 businesses and financial institutions are working with the Science-Based Targets Initiative to reduce their emissions in line with climate science.
  • And more than 1000 cities, over 1000 educational institutions, and over 400 financial institutions have joined the Race to Zero, pledging to take rigorous, immediate action to halve global emissions by 2030.



Are we on track to reach net zero by 2050?

  • Current national climate plans – for 193 Parties to the Paris Agreement taken together – would lead to a sizable increase of almost 11% in global greenhouse gas emissions by 2030, compared to 2010 levels.
  • Getting to net zero requires all governments – first and foremost