ACCELERATING
SUSTAINABLE GROWTH

Forest carbon credit considered as a non visible forest product” that can be a viable alternative source of income for forest landowners. It’s a metric ton of carbon dioxide equivalent (CO2e), of whichthe emission is newly sequestered and is purchased by GHG emitters as a cost-control measure to make up for emissions occurring elsewhere.

Managing forests for carbon emission offsetting gives the world the opportunity to reverse or at least sequestered the emissions that they have already made or they are about to make into the atmosphere. The total GHG emissions are increasing rapidly. Most of the GHG emissions of all time have been done in the last 40 years of our existence. More GHG emission mean climatic shifts which leads to intensive droughts somewhere and acute floods in other areas of the world. Because of those blindly done deforestation which hampers the smooth functioning of the forest and gets in the middle of the process of habitats having their share of biodiversity.

Researches around the world point to a fact that forests can play a vital role in mitigating the inimical effects of climate change and can help in putting a shackle on this ever-increasing global warming. Quality and Quantity of herbs, restoring the disbalances caused by humans in nature, water as a resource in quantity & quality, providing wildlife a habitat to call home and protecting biodiversity in that habitat.

Forest & Carbon Offset

To get an understanding of the carbon offset markets, we need to know how CO2 is measured and traded for various purposes. CO2 being the major contributor as the GHGs in the atmosphere, promoting global warming. All other gases are not actually come that much into consideration because CO2 is more easily measurable that others. The carbon unit in which it is measured is “metric tons of CO2 Equivalent” often seen written as MtCO2e or tCO2e & also called as “Carbon Credit or Carbon offset”. Currently sellers of carbon offsets are majorly forest landowners who are looking to opening up different forest-based revenue streams by helping out the GHG emitters in exchange of a handsome payday.

Carbon Marketplaces

There are two distinct types of carbon markets; voluntary and compliance markets

Carbon markets are divided into two subdivisions – voluntary &compliance markets.

Voluntary markets exist where companies or individuals buy carbon credits for purely a voluntary basis. Many companies voluntarily purchase carbon credits to demonstrate their commitment to protecting the environment and to demonstrate corporate social responsibility.

Voluntary markets are there for the individuals and companies so that they buy the credits for the sole purpose of showcasing their concern towards the environment, its well-being and their willingness to go above and beyond to correct it. It fulfils their commitment to live up to the corporate social responsibility they owe to the society.

Prices for the carbon offset in voluntary market, globally, can fall anywhere between a wide range.Forest authorities & land usage projects are somewhat larger voluntary carbon project categories than any other kind. There are numerous factors that influence the price determination of carbon credits at the very point in time for e.g.,the type & location of project that is put up against asking for the credits, additional deemed project benefits that will play out to be an influencing factor, marketing efforts & many others.

The emission stays within limit as it is cancelled out by the very nature of the deal and there is no margin left to betray the environment in any case.

Compliance Carbon Market

Compliance carbon markets are such marketplaces through which “regulated by the cap & trade” entities obtain & surrender emissions allowances or better known as ‘offsets’ in order to meet predetermined regulatory targets.

In case of cap & trade programs; participants i.e., both emitters and intermediaries such as financial institutions; both are allowed to trade allowances to make profit from the unused allowances or for meeting regulatory requirements.

As the global crisis is looming over the world, even developing countries are doing their share tocut down carbon emissions. At the 26th climate summit (COP-26) in Glasgow-UK, under the leadership of Prime Minister Narendra Modi, India announced that it will become a carbon-neutral nation by 2070.

Achieving net-zero will mean a balance between the greenhouse gases produced and eliminated from the atmosphere. Being the 3rd most carbon emitter in the world, it is the first time India has set targets and strategies on an international platform to counter the climate crisis.

Prime Minister Narendra Modi declared the following 5-point strategy that will ultimately make India Net Zero by 2070:

• India will get the non-fossil energy capacity to 500 gigawatts by 2030. Currently, the non-fossil energy capacity is 136 gigawatts.
• India’s 50% energy consumption will come from renewable energy.
• It has set to reduce 1 billion tonnes of carbon emission by 2030
• By 2030, India will reduce the carbon intensity by 45%
• And finally, by 2070, India will achieve its net-zero target.

India’s action to counter the global crisis

India is the third most emitter of greenhouse gases in the world. However, it is important to note that there's a stark difference between India’s emissions as compared to the other top polluters. India nearly emits 3 gigatonnes every year, while US and China emit 5 gigatonnes and 14 gigatonnes, respectively.

In addition, India has the lowest per capita emission of 1.9 metric tonnes and contributes to 7% of world pollution even when it makes up 17% of the world population. Realistically speaking, India has a higher chance of reaching the net-zero goal before the US, EU and China.

The progress in building renewable energy infrastructure looks promising. As per Invest India, over the past 5 years, solar capacity has increased from 6.7 GW to 40 GW in 2021. Wind capacity has also increased by 2.2 times since 2017.

India is all set to open the largest renewable energy park of 4750 MW in Gujarat. Besides, PM Narendra Modi’s upcoming plans to reduce India's coal dependency by not setting up any more coal energy plants and decarbonising Indian Railways by 2030 is a start in the right direction.

A challenge that lies ahead

The most obvious challenge for India is to secure climate finance. As a developing country, India depends on the developed countries to provide the finance for the formulation of new technologies and methods to reduce its coal dependency.

In the COP-26, PM Modi demanded the rich countries make 1 trillion USD available as soon as possible. Unfortunately, these countries already have many unmet promises regarding climate finance.

To conclude, the goal to become Net Zero will not be a cakewalk for any developing nation. However, it will become extremely challenging for developing countries to create groundbreaking technologies without the needed financial assistance.

Hence, the way forward to achieving the collective goal is for rich countries to take charge and lead the way. As they will be able to bear the heavy initial research & development costs, developed nations are more likely to create innovative decarbonisation technologies.

India will also have to change its energy infrastructure. Some strategies will even require lifestyle changes from its citizens. However, with strategizing and global support, India will surely complete its promises successfully.

Global warming is affecting the Earth more viciously than expected. The alarming rate at which the glaciers are melting and the sea levels are rising threatens the mass extinction of every species on the planet.

To counter this challenge, governments around the world came together and have designed a market-based system called carbon trading, under the Paris Agreement, to control and regulate the carbon emitted by businesses, especially the ones that are heavily dependent on fossil fuels.

How does carbon trading work?

There are multiple models designed to facilitate carbon trading, but the recent and successful one is the Cap and Trade scheme.

Cap and Trade Scheme

In this scheme, the government sets a limit on the emission over a time period and allots a fixed number of permits to compensate for the pollution. Each carbon permit is equal to one tonne of CO2 equivalent. Therefore, companies need to track their carbon footprint to comply with the carbon trading scheme.

Businesses that effectively reduce their emissions and manage to spare some carbon credits can auction them for money. Similarly, companies who exceed their carbon emission threshold limit can purchase carbon credits from these auctions.

Carbon Offsets

Another way companies aim to compensate for their exceeding their cap limits is by buying carbon offsets in the free market. Carbon offset refers to any activity which reduces the emission of greenhouse gases elsewhere.

Usually, the sellers of these offsets are project developers who design carbon-reducing systems and technology. Hence, each ton of carbon that is avoided polluting the environment counts as one carbon offset.

Advantage of Carbon Trading

Carbon trading has collectively involved the prime polluters from the developed countries to implement technologies that reduce their emissions. As these companies are majorly dependent on fuels, they usually exceed their allotted threshold, and hence are forced to buy carbon credit from the developing nations, providing the latter with the financial aid it needs.

Carbon trading also provides the flexibility to businesses to change their operations at their own pace. For example, small businesses can easily implement the latest technologies to reduce their carbon footprint and auction the spare carbon credits. Likewise, big corporations can buy these carbon credits to compensate for excess carbon emissions.

Disadvantages of Carbon Trading

Although carbon trading has lowered the carbon emission of many businesses, the scheme is still loose-ended and can be exploited by some companies via its loopholes. As the west is adapting to the concept, there�s still a lot of room for its improvement.

Nevertheless, carbon trading schemes are a work in progress and with stricter laws and controlled demand and supply of carbon permits, the scheme can drastically help the world counter global warming