Buy Carbon Credits

To buy carbon credits is a way to reduce your carbon footprint.

Each of us leaves carbon footprints, whether through the way we travel, what we eat, things we buy, how we live, and so on.

In turn, carbon footprint is the emission of green house gases made by countries, companies, individuals and products, either directly or indirectly. And these carbon footprints contribute to the global warming problem.

The concept of carbon credits

The concept of carbon credits was born out of the Kyoto Protocol.

To help reduce carbon dioxide and other green house gas emissions into the atmosphere, each participating country in the Kyoto Protocol was assigned a specific number of carbon credits with each credit being valued as one ton of greenhouse gases released into the atmosphere. Each country could then distribute its credits to its companies and industries, as it deemed fit. When carbon credits were used up, meaning that a certain country had already emitted their quota of green house gases, the country had to buy carbon credits from other countries that had not used up their own credits. Only when more new credits were purchased could a country that had met its quota continue emitting green house gases into the atmosphere.

This system of buying and selling – i.e. trading – carbon credits is intended to keep the green house gas emissions in the atmosphere at a predetermined level, through limiting the emission by each country. Because a price is being assigned for pollution by the green house gasses, there is an incentive for countries to lower their emission. Countries that emit much green house gas now literally have to pay for their pollutant. At the same time, less polluting countries can now make money by selling their excessive carbon credits to more polluting countries. It is a win-win situation!

System for trading of carbon credits

Several climate exchanges were born to accommodate the trading of carbon credits. Today there are six such exchanges at work: the European Energy Exchange, PowerNext, NASDAQ OMX Commodities Europe, Commodity Exchange Bratislava, the European Climate Exchange and the Chicago Climate Exchange.

The European Energy Exchange is an important energy exchange in Europe. Located in Leipzig and operating 24 hours a day, the European Energy Exchange trades credits for carbon, electricity, natural gas and coal. PowerNext is an exchange located in Paris, which deals with natural gas and electricity, besides carbon credit trading. The NASDAQ OMX Commodities Europe is the energy exchange market for Denmark, Sweden, Finland and Norway. Located in Oslo, it trades carbon credits and electricity. The Commodity Exchange Bratislava, located in Slovakia, is an exchange that trades carbon credits among other commodities, like agricultural goods. Both the European Climate Exchange and the Chicago Climate Exchange are sister companies and are the most important climate exchanges. The European Climate Exchange deals around 80% of the European carbon trade market and the Chicago Climate Exchange is the only American carbon trading exchange market.

Every carbon credit transfer must be validated by the UNFCCC (United Nations Framework Convention on Climate Change) and for trades between European countries, the transfer has to be validated by an additional layer – the European Union. Carbon credits are usually priced in Euros.

Carbon credits for individuals

Not only countries, industries and organizations buy carbon credits.

Individuals and even small companies can purchase carbon credits as a means of reducing their carbon footprint. In fact, it is becoming a common practice for individuals to buy carbon credits, to offset their carbon footprint.

So how can a person buy carbon credits and how do these credits work?

Well, many companies sell carbon credits, or carbon offsets, as they are also known. These companies have connections to different environmental programs which contribute in one way or another to the reduction of carbon emissions into the atmosphere. These environmental projects could include reforestation programs, renewable energies programs and green technologies development. What happens when an individual buy carbon credits is that he or she actually helps to finance these environmental programs. As such, indirectly, the individual is helping to reduce the overall carbon footprint on this planet. You can find out more about carbon offsets and how you can buy carbon credits from Carbonfund.

According to the report “Fortifying the Foundation: State of the Voluntary Carbon Markets 2009”, $705 million worth of individual carbon credits were bought in 2008, translating in a carbon emission mitigation of 123.4 million metric tons. What it means is that even as individuals, you can make a difference.

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