Carbon Credits?

Carbon credits are certificates awarded to countries that are successful in reducing the emissions that cause global warming. For trading purposes, one credit is considered equivalent to one tonne of carbon dioxide emission reduced. Such a credit can be sold in the international market at a prevailing market rate. The trading can take place in open market. Developed countries that have exceeded the levels can either cut down emissions, or borrow or buy carbon credits from developing countries. However there are two exchanges for carbon credit viz Chicago Climate Exchange and the European Climate Exchange. Carbon credits creates a market for reducing greenhouse emissions (carbon) by giving a monetary value to the cost of polluting the air. International treaties such as the Kyoto Protocol aim to mandate countries to set quota's for the maximum greenhouse emissions their country will pollute. Countries in turn enacts laws that restrict or provide a quota on the maximum emissions a business can have. Those who exceed their quota then need to buy credits from an open 'carbon' trading market. Hence creating a real financial cost of polluting where currently there is a cost but it is not recognised monetarily. Organizations such as Rainforest Credits and Tropical Sierra are working in conjunction with universities all over the world to build an online information database known as the Rainforest Encyclopedia for businesses and industries to research and calculate what they need to invest in to offset their greenhouse gas emissions. The Concept of Carbon credit came into existence as a result of increasing awareness on the need for pollution control. It took the formal form after the international agreement between 141 countries, popularly known as Kyoto Protocol. Carbon Credits are certificates awarded to countries that are successful in reducing the emissions that cause global warming. The Kyoto protocol was signed by as many as 141 countries, with the US (one of the major polluting countries) staying out of the agreement. Some countries, like India and China, which have ratified the protocol, are not required to reduce carbon emissions under the present agreement despite their relatively large populations. The Kyoto protocol aims to reduce the green house gas emission by 5.2% below the 1990 levels by 2012. The first phase of the protocol will begin in 2007 and the second phase in the next year (2008). In each phase non-compliance will invite monetary penalty.