Carbon Purging

With all of the myriad carbon markets out there, it is very easy to get the three confused, or even think they are one in the same. Governments and markets in many countries, including the US, UK, and EU, have laws that force companies to purchase permits to release carbon dioxide (CO2) pollution into the atmosphere.

Carbon trading is when companies purchase carbon credits, or permits, directly, or through secondary market channels, and sell them to other companies or individuals, typically taking a profit for the service.

Carbon offsets are financial instruments representing a reduction in greenhouse gas emissions. Carbon offsets are measured in metric tons of carbon dioxide-equivalent (CO2e). Though one carbon offset is meant to represent the reduction of one metric ton of carbon dioxide, many times there is no actual reduction. Companies that are currently doing things to reduce their CO2 often apply for carbon offset credits after the fact. Also, government-mandated reduction projects can often qualify for carbon credits

Finally, carbon retirement is when CO2 pollution permits are purchased, whether through a trader or an authorized government issuer, and are “retired”, typically meaning put into a trust preventing their use. This means that measurable amounts of CO2 are prevented from being released into the atmosphere.

By buying a permit for one tonne of emissions and taking it out of a market we take it out of the hands of would-be polluters and force them to invest more in cleaning up their act. The market contains many millions of permits so each individual action has only a small effect but it does genuinely mean one less tonne of permitted emissions. If lots of us buy permits, however, it will become more expensive to pollute and then cleaner ways of doing things will receive more investment.

By destroying a permit you are also making yourself a stakeholder in this important issue showing decision makers that you are prepared to pay now to help solve the problem. Since solving climate change is all about time and money this is an important action.

Traded markets in pollution rights can be hugely important forces for change if they are designed and implemented correctly. Produce a low number of permits and the world emits less and the cost of permits rise. Produce too many and nobody has to do anything and prices fall to zero. Pollution markets are created by Governments. They come under pressure from emitters to keep the number of permits generous. They also worry about higher prices pushing up the cost of living. This makes them very, very cautious. By applying pressure in the other direction - by showing we are prepared to pay for fewer permits to be in circulation we can help to ensure trading really delivers change at the scale and pace necessary to tackle this problem.

Carbon dioxide and other greenhouse gases are being emitted in huge volumes all over the planet and are highly concentrated in rich
countries. These additions to the atmosphere last for many years,
accumulating and trapping more of the suns energy. Thankfully some
sensible people in the UN and Brussels have decided to take control of the situation. Rich countries and large commercial sources of greenhouse gases are now legally prevented from emitting more than a fixed amount in a given year – their emissions are capped. But because it doesn’t really matter to planet earth where emissions of greenhouse gases occur – they all eventually do the same thing: heat the planet up - the regulators have said if you have to emit more than your cap, you can, but you have to find someone else who is prepared to emit less than their cap to sell you their permit to emit. And this market in buying and selling pollution permits is now underway, governed by rules set periodically by the UN and Europe.