EMISSIONS TRADING IS QUICKLY EXPLAINED.

Climate change is on everyone’s lips. Many consumers are therefore becoming increasingly aware of environmental and climate protection. Their consumer behavior is also changing accordingly. Companies are responding to this change. To this end, they rely on so-called climate certificates. In this way, the companies promise to compensate for any CO2 emissions that arise. In return, they label their products or services with words like “climate-neutral” or “eco” – and usually charge a premium for it.

The most important in a nutshell

  • – The principle of climate certificates and offsetting is to prevent the emission of a certain amount of greenhouse gas emissions elsewhere in the world.
  • – Emissions trading at this level is called a “regulated market” because it is managed and controlled by a United Nations agency.
  • – Emission reductions achieved on the voluntary market cannot be sold or purchased under the official emissions trading scheme.

The basic principle: compensation

Climate change is a global problem. CO2 is being blown into the atmosphere all over the world – more in some places, less in others. Therefore, it protects the climate just as much if one ton of CO2 is saved in India instead of in Germany. The principle of climate certificates and so-called offsetting is to prevent the emission of a certain amount of greenhouse gas emissions, which is not avoided in this country, elsewhere in the world. To this end, there are projects that are building a wind farm in India, for example, where a coal-fired power plant was originally planned. By purchasing climate certificates, companies support these projects and thus offset their own emissions.

The regulated market

Climate certificate trading takes place on two different levels. First, at the state level under the Kyoto Protocol. Here, the signatory states have three flexible mechanisms at their disposal: Emissions Trading, Clean Development Mechanism (CDM) and Joint Implementation (JI).

As a starting point, greenhouse gas-emitting companies receive a “pollution budget” from their respective governments. If the company exceeds this budget, it can buy additional CO2 certificates from other companies through emissions trading. Conversely, each company can sell its emission rights if it remains below the pollutant budget. The CDM and the JI are compensation instruments. Through these, companies can offset their emissions elsewhere and thus also improve their pollution budget.

Emissions trading at this level is called a “regulated market” because it is managed and controlled by a United Nations agency. Climate protection projects that wish to sell certificates at this level must be recognized by this authority. Such projects generate certificates that are part of a country’s official emissions registry. These certificates are called CERs: “Certified Emission Reduction Units”.

The voluntary market

The second level is the so-called “voluntary market” outside the Kyoto system. The emission reductions achieved here cannot be sold or purchased as part of official emissions trading. Therefore, the quality standards of the United Nations do not apply here. Basically, anyone can set up a climate protection project and issue a certificate or attestation to the funders. The certificates in this market are therefore referred to simply as VERs (Verified Emission Reduction Units). The emission reductions are therefore only verified, not certified.

Since this market is not regulated and there are no uniform quality standards, there are many projects floating around where the actual greenhouse gas savings are questionable and controversial. The nature of some projects is problematic, for example CO2 compensation via the planting of new trees, so-called reforestation. Such projects are often to be rejected on the one hand because of the negative ecological consequences of plantations, and on the other hand because the long-term storage of CO2 is by no means guaranteed. An unforeseen burning of the trees would release all the stored CO2 again.

Examples of reliable standards

Unfortunately, unlike the regulated market, there is currently no uniform quality standard in the voluntary market. What should consumers and entrepreneurs look for guidance? Here are some examples of reliable standards, most of which are based on the Kyoto Protocol criteria.

  • – Gold Standard
  • – VER Standard
  • – CarbonFix Standard
  • – CCB Standard
  • – Verified Carbon Standard
  • – California Climate Action Registry
  • – MoorFutures

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