Global Green Carbon

The Carbon Market

Climate Change: What does that mean?

A consensus of over 3500 scientists around the world has concluded that man-made CO2 emissions are the main cause of climate change. Recent measurements show a steady increase in mean atmospheric Carbon dioxide concentration from about 315 parts per million in 1958 compared to 389 parts per million as of October 2011.

Unfortunately CO2 does not fall out of the atmosphere like dust; in fact half of the CO2 emitted today will still be in the atmosphere a century from now. Carbon dioxide partially blocks infrared radiation and reflects the heat-bearing radiation back to the earth. As the carbon dioxide levels have increased, they have reflected and trapped more infrared, and the heat within it back to earth and is the cause of man-made global warming or the “greenhouse effect”. It is known that the Earth’s surface has warmed by approximately 0.9° centigrade (1.7° Fahrenheit) in the past 50 years1  - most scientists attribute the vast majority of this warming to anthropogenic greenhouse gas emissions, and predict rises of 3-6° centigrade (5.5 - 11° Fahrenheit) over the next century.

Carbon Offsets

The concept of carbon credits and carbon trading originated from the Kyoto Protocol of 1997. This mandates that countries who have ratified the Kyoto Protocol must meet set emission reductions, while other countries and companies are voluntarily reducing their emissions through voluntary carbon markets. The generation and trading of carbon credits is a key component to achieving these emission reductions.

A carbon offset is a financial instrument representing a reduction in, avoidance of, or removal of greenhouse gas emissions from the atmosphere.  Carbon credits are measured in tons of carbon dioxide (CO2). Each credit is equal to one metric ton of CO2 equivalent, with a monetary value on the cost of polluting the air. Placing a value on carbon aims to prevent it from being emitted in the first instance and to make its removal from the atmosphere financially viable.

The monetary value of carbon credits vary significantly based on the credit type, carbon exchange platform, market maturity, buyer knowledge/education and supply and demand.

The primary offset trading units are:

•    Certified Emission Reductions (CERs) are units of greenhouse gas (GHG) emissions reductions issued pursuant to the Clean Development Mechanism of the Kyoto Protocol
•    Verified Emission Reductions (VERs) are units of greenhouse gas reduction outside the Kyoto Protocol and are measured according to internationally agreed upon methods

Carbon Trading

Carbon credits require authentication with a regulatory body in order to be traded. A number of carbon credit variants exist, each meeting different sets of regulations and criteria. Depending on the type of credit, they can be traded through the Kyoto Protocol mechanisms to assist countries in meeting their targets, through carbon trading exchanges such as the European Carbon Exchange (if the credits originate from a Least Developed Country), or voluntary carbon markets such as the Verified Carbon Standard or the Climate Action Reserve.

Climate exchanges have been established to provide a spot market in allowances, as well as futures and options market to help discover a market price and maintain liquidity. Carbon prices are normally quoted in Euros per tonne of carbon dioxide or its equivalent (CO2e). Other greenhouse gasses can also be traded, but are quoted as standard multiples of carbon dioxide with respect to their global warming potential. These features reduce the quota's financial impact on business, while ensuring that the quotas are met at a national and international level.

Whether or not a country has ratified the Kyoto Protocol, any legal entity (companies, individuals, NGOs, etc.) is able to trade carbon. However, the type of carbon credits will determine which markets they can trade on. All countries and legal entities must meet any legal emission reduction targets set by the Kyoto Protocol or government caps, but are free to trade additional carbon credits in the fast growing carbon market.

Market Growth

In 2010 the volume of voluntary carbon credits traded on international markets was equivalent to 131 MtCO2, a rise of 34 % on 2009. That this rise occurred despite the global economic crisis shows the resilience and momentum behind the voluntary carbon markets. During 2010 the largest proportion of credits (29 %) were sold for REDD/Avoided deforestation projects, with a further 6 % of credits being for afforestation/reforestation activities. The carbon certification bodies used by GGC dominated the market, with 34 % of credits were sold by the VCS Standard, with the next largest being the CCB standard (19 %) and the Climate Action Reserve (16 %).


1 Independent studies from NASA, National Oceanic and Atmospheric Administration (NOAA), UK Met Office & Hadley CRU, & Berkeley Earth Surface Temperature Group.




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