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Carbon Markets: Eco-Friendly Solutions



  Feb 08, 2024

Carbon Markets



1. What are carbon markets?

Carbon markets are systems that allow countries or companies to buy or sell credits for greenhouse gas emissions. One credit typically allows the holder to emit one ton of carbon dioxide or an equivalent amount of other greenhouse gases.

2. Why are carbon markets important?

Carbon markets are important because they put a price on carbon emissions, incentivizing companies and countries to reduce their greenhouse gas emissions. This can help meet global targets for limiting climate change.

3. How do carbon markets work?

In a carbon market, governments set a limit on emissions (a cap), and companies can trade emissions allowances or credits. Companies that reduce their emissions can sell excess allowances to those who exceed their caps.

4. What is a carbon credit?

A carbon credit is a permit that allows the holder to emit a certain amount of carbon dioxide or other greenhouse gases. It can be bought or sold in the carbon market.

5. What happened at COP 28 regarding carbon markets?

At COP 28, discussions on carbon markets were held, but a consensus on the terms and conditions of the global carbon market was not reached.

6. What are compliance and voluntary carbon markets?

Compliance markets are regulated by governments and require companies to stay within emission limits or buy allowances. Voluntary markets allow companies to buy credits to offset their emissions out of social responsibility or for public relations.

7. How does India participate in carbon markets?

India is a significant supplier of carbon offsets, where organizations can earn credits through activities like afforestation. India also has its own market-based emission reduction schemes, like the PAT scheme for energy-intensive industries and the REC system for renewable energy.

8. What are the challenges with carbon markets?

Challenges include setting the right price for carbon, ensuring the credibility of carbon offsets, and preventing carbon leakage, where companies move operations to countries with less strict emissions regulations.

9. What is carbon leakage?

Carbon leakage occurs when companies transfer production to countries with laxer emission constraints to avoid carbon costs, leading to no net reduction in global emissions.

10. How do carbon markets fit into climate change mitigation?

Carbon markets are one tool among many to help reduce global greenhouse gas emissions. They provide a financial incentive for companies to emit less and invest in cleaner technologies.


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