A child’s primer to carbon credits
It has long been accepted that climate change is not only a natural result of forces in nature itself, but is assisted by the effect of greenhouse gases. Various gases emitted into the earth’s atmosphere both as a result of natural causes and the industrial efforts of man, are to blame for what has come to be called the greenhouse effect. In addition to carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O)1 and hydro fluorocarbons (HFCs) all add to the greenhouse effect. Of the lot, carbon dioxide is not the worst, but as a result of the amount of carbon dioxide pumped into the atmosphere, it is man's biggest single contributor to the greenhouse effect. Methane, when oxidised (e.g. when being burnt in oxygen) breaks down into carbon dioxide and water, so even burning methane adds to the amount of greenhouse gases man produces. Methane is also freely produced as a result of decomposing vegetable matter, and is the main ingredient of natural gas.
These gases, once in the atmosphere, form a sort of blanket above the earth that causes the warming effect of the sun’s rays to accumulate in the atmosphere instead of being dissipated and reflected back into space. The result is global warming as though the earth itself is orbiting inside an enormous glass greenhouse. The effects of global warming are potentially disastrous, and have already become a cause of great concern to many people, to say nothing of the havoc it is already wreaking in nature as a result of melting polar ice caps and expansion of deserts.
The greenhouse effect can be combated. Similar to a diet where in principle the solution is to ingest less calories than you burn, the simple solution is simply to produce less greenhouse gasses than the earth can absorb. One of the great contributors to the greenhouse effect is the large scale destruction of rain forests. All growing things absorb carbon dioxide to a greater or lesser extent, and then through the process of growth and ultimate decomposition, the carbon is ultimately again deposited into the earth without ending up in the atmosphere as a greenhouse gas. The problem is that one ideally needs long term growth of trees and shrubs, as crops in the form of annuals, for example, have a minimal impact on reducing greenhouse gases.
A particularly useful plant in reducing specifically carbon dioxide is the spekboom2 (Portulacaria afra, also known as “elephant’s food” or the “pork tree”), which is indigenous to the Eastern Cape in South Africa. These trees, each growing to approximately 2 metres in height with a bushy appearance, are said to have a capacity of absorbing in excess of 4 tonnes of carbon per hectare of trees per annum. There is now a project to extend the coverage of spekboom in order to assist with carbon absorption. One of the advantages of the spekboom is that it thrives in climates where the rainfall is only between 250 and 350 mm per annum.
With a view to limiting carbon emissions and hopefully to ultimately end with a situation where there is capacity to absorb more carbon than man and nature emits, the Kyoto Protocol was drawn up and agreed to in 1997. In terms of this international treaty it was agreed between the contracting states parties to contain carbon emissions by planting trees or limiting emissions. This is where the notion of a carbon credit enters the arena.
States parties to the treaty are classified by the Kyoto Protocol according to their level of industrialisation. The highly industrialised countries have agreed to limit their emissions and to decrease their emissions to pre 1990 levels progressively, while less developed or developing countries agreed to limit and decrease their emissions in relation to other dates fixed in the agreement. Where a country now succeeds in emitting less carbon than it is allowed in terms of the protocol, it is credited with the balance. This credit is referred to as a carbon credit, which is an asset capable of being sold to a country that has failed to achieve its emission goal.
As an example: A third world country X has an emission target of 100 000 tonnes of carbon per annum. It is calculated that it only emitted 80 000 tonnes in a given year. It can now sell the remaining 20 000 tonnes it has in credit to industrialised first world country Y, which has failed to limit the emissions to its target. Y can buy as much carbon credit as it needs to bring it within its emission target.
The notion is not limited to countries only. Individual industries and also companies or corporations can generate carbon credits which they can sell forward to other entities that have failed to limit emissions to targeted levels. An example from real life: Inventor A patents a device which uses natural gas to generate electricity, but which also “scrubs” the emissions, resulting in carbon-free emissions from the power plant. In terms of the internationally accepted and agreed standards, the power plant, given the amount of electricity it generates, must limit its carbon emissions to 50 000 tonnes per annum. As a result of the technology the inventor has developed, the emissions are only 5 000 tonnes per annum. The company can now sell the credits it generates to another company which has not succeeded in limiting its emissions to satisfactory levels, thereby increasing the profits of the power station.
The main idea is that less industrialised countries can benefit if the example above can be followed: Electricity can be generated using abundantly available natural gas, and selling the carbon credits to industrialised countries, making power more cheaply available in the poorer country.
Given that at present (2009) carbon credits sell for between US$ 10 and US$ 40 (depending how desperately the buyer needs the credit), it can be a lucrative business. The incentive to buy lies of course in the fact that countries and businesses that fail to limit their emissions to agreed levels, will be fined rather severely. In the end the idea is that it will be cheaper to buy the carbon credits than to pay the hefty fines.
1 Most commonly known as laughing gas.
2 Literally the “bacon tree”, probably because of its fat, succulent-like leaves which contain an abundance of sap. The leaves are a particular favourite of goats.