Green Climate International
International carbon market
International carbon market is a global system where countries, companies, and other entities can trade carbon credits or allowances to meet emissions reduction targets. It is part of global efforts to combat climate change by incentivizing the reduction of greenhouse gas (GHG) emissions through market-based mechanisms.
There are two main types of international carbon markets:
1. International Carbon Trading (Compliance Markets)
These markets are designed to help countries or companies meet their emissions reduction commitments under international climate agreements, such as the Paris Agreement. The idea is that if one country or company can reduce emissions at a lower cost than another, they can sell their excess reductions (in the form of carbon credits) to others who need to buy them to meet their targets.
- Carbon Credits: These are tradable certificates that represent a reduction of one metric ton of CO2 (or equivalent gases). They are issued by regulatory bodies or carbon market platforms after verification that emissions have been reduced or offset.
- Cap-and-Trade Systems: These systems set a cap on emissions for a group of entities or a country and allow trading of carbon credits among them. The European Union Emissions Trading System (EU ETS) is one example.
2. Voluntary Carbon Markets
In addition to compliance markets, there are voluntary carbon markets, where businesses, individuals, or organizations voluntarily purchase carbon credits to offset their emissions, even if they are not legally required to do so. This helps organizations meet their sustainability or corporate social responsibility (CSR) goals.
- Offset Projects: These markets often involve carbon offset projects such as renewable energy initiatives, forest conservation, or reforestation projects, which help to absorb or prevent the release of CO2 from the atmosphere.
Key Components of the International Carbon Market:
- Carbon Credits: Represent verified reductions in GHG emissions (1 ton of CO2 or equivalent).
- Carbon Price: The cost of purchasing one carbon credit, which fluctuates based on market conditions, demand, and policy changes.
- Carbon Exchanges: Platforms where carbon credits are bought and sold, such as the European Carbon Exchange or the Chicago Climate Exchange.
The international carbon market provides a flexible and cost-effective way for countries and companies to reduce emissions. By allowing the transfer of carbon credits across borders, it promotes global cooperation in tackling climate change and offers economic incentives for emission reductions.