Environmental reform over the last decade has spurred the creation of a new tradeable emissions scheme. Carbon credits as a term refers to the specific assigned amount of environmental emissions as a unit of measure. To simplify the concept, one carbon credit is approximately one tonne of carbon emissions. Ratification of such a unit of measure has been the hot topic of debate in the recent years, with many adverse views on how to measure the level of carbon emissions.
The carbon credit and green house gas emission management policies were developed in the 90s and formalised under the Kyoto Protocol. Specific policy has been the key driver behind the environmental debate with the United States and Australia only recently highlighting the importance of global warming. Initially the Kyoto protocol was ratified by the European Union with several important policies implemented. Some of the key specifics of this policy include:
- Tradeable Carbon Credit market regulated by UNFCCC
- National registration and Categorisation of businesses based on emission levels
Revolutionary and forward thinking in their implementation, the European Union setup the European Trading Scheme which focused on providing a liquid and transparent market place for businesses and companies in the EU. In 2005, the EU reported that all nations within the zone would be subject to the strict gas emission standards set out in the Kyoto protocol. Two nations however during this period did not ratify the agreement. Australia and the U.S highlighted to the global community that their non compliance was a consequence of their resource and industrial focused economies. They debated that the Kyoto protocol would unfairly disadvantage nations who focused on certain high emissions industries like mining. In 2008, the election of the labor party in Australia led to the ratification of the Kyoto accord and the release of the Garnot report which outlined a possible emissions trading scheme.
The key issue that arose from the Kyoto Protocol, was the accessibility of a trading scheme and the complexity of unlocking emissions credits. Three proposed strategies were implemented and adopted in full by 170 nations in 2008. These included:
- Emissions Trading Exchanges – assigning credit amounts and levels for businesses to trade. With the implementation of the climate exchange in Europe and Chicago, Australia is now looking to design a similar system.
- Clean Development Initiative – This proposed strategy led to a heightened awareness of green house gas emissions in emerging or under developed nations. Under the Kyoto protocol, developed nations looking to lower or compensate for their high levels of emissions could support third world initiatives which would cut overall gas levels. This became quite popular with the establishment of many socially responsible projects.
- Co-operative Agreements – Development of joint initiatives between developed countries.
The Kyoto Protocol was an initiative in the 90s to effectively manage green house gas emissions. Its relevance in the modern day and the effective change of global governmental policy has spurred the development of a new sector and industry. Although the recent global financial crisis has placed the environmental debate on the backburner, the global community still sees the importance and need of environmental economic standards.