When Did Carbon Credits Start?

Carbon Credits Start

Carbon credits began to be traded in 1997, as part of the UN Kyoto Protocol, the first international agreement to limit CO2 emissions. The Protocol set emission caps for industrialized nations and created a “Clean Development Mechanism” whereby industrialized countries could offset their emissions by planting trees in the tropics. Since then, the carbon credits market has expanded and a large industry has developed around certifying and marketing them.

carbon.credit work as a compensation mechanism and certification system for companies that reduce their GHG emissions. They ensure that there is a balance between certified mitigations and GHG emissions. This incentivizes businesses to reduce their emissions and sell their extra allowances for cash. Proponents of the carbon credit system say it creates measurable reductions in greenhouse gas emissions.

Carbon credits are issued in exchange for an equal amount of a specific gas. The carbon dioxide equivalent of one credit is one metric tonne (mt). They can be sold, bought, or retired. These credits are especially useful for businesses that are regulated under cap-and-trade systems.

When Did Carbon Credits Start?

Carbon credits are the result of a cap-and-trade system. The program works by setting a price for emissions. The price is determined by a market that is regulated by governmental organizations. The IHS Markit Global Carbon Index tracks the price of carbon credits at a global level. The Kyoto Protocol, signed in 1997, compelled the 37 industrialized nations and the European Union (UE) to reduce their carbon emissions. It created a market for carbon credits and introduced the cap-and-trade system.

Carbon credits are generated primarily through agricultural and forestry activities, but they can be generated by nearly any project. Carbon credits are then sold to companies who want to offset their emissions. Some companies and individuals purchase these credits directly from carbon capturers, while others buy them from a middleman. These middlemen then make a profit from the sale of these credits. Involuntary markets are also developing, such as the one in California.

The market for carbon credits began to grow as more companies became interested in the concept. Recently, Microsoft, a leading tech company, purchased more than 1.3 million tons of carbon credits from 26 projects. Many of these credits were newly created. The company bought a new kind of carbon credit from Wilmot Cattle, an Australian company that said its cattle grazing methods added 40,000 tons of carbon to the soils within three years.

Carbon credits are used to offset emissions of different greenhouse gases. In a cap-and-trade system, a company that emits carbon dioxide is awarded a certain number of carbon credits. Those credits can be sold, retired, or exchanged for a higher amount of CO2. This system also allows companies to make money reducing their emissions and sell the excess credits.