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28th March 2024 (12 Topics)

‘Effectiveness’ of Carbon Credits


The world is facing a critical threat with climate shifts. Though governments are employing carbon trading as a strategy to decrease their emissions, their “effectiveness” is questionable.

1: Dimension-Global shift towards Carbon Trading

  • The global, multibillion-dollar voluntary carbon trading industry has been embraced by governments, organisations and corporations including oil and gas companies, airlines, fast-food brands as a way of claiming to reduce their greenhouse gas footprint.
  • It works by carbon offset credits being tradable “allowances” or certificates that allows the purchaser to compensate for 1 ton of carbon dioxide or the equivalent in greenhouse gases by investing in environmental projects that claim to reduce carbon emissions. 

2: Dimension-Role of Carbon credits in combating climate change

The increasing pressure to act on nature loss led governments and companies worldwide to ramp up their decarbonisation commitments.Though carbon crediting offers a multitude of benefits, making it an effective tool in the fight against climate change, there persist some issues:

  • Greenwashing: This does not lower the overall amount of greenhouse gases released by buyers. They are simply offset, which gives corporations a way to claim they are eco-friendly without reducing their overall emissions.
  • Lack of genuine efforts: Carbon credits will entice businesses to engage in greenwashing by purchasing offsets and not making genuine efforts to reduce their GHG emissions.
  • Permanence: The trees planted for additionality might be lost again and release the previously captured carbon back into the atmosphere. 
  • Other ways for reduction: The emissions reductions claimed by some carbon offset projects would have occurred anyway even without the offset project.
  • Multiple issues:Over the years, offset projects have been dogged by allegations of land conflicts, human rights abuses, hampering conservationand furthering coal use and pollution.

Way forward

Carbon credits provide a mechanism to quantify and incentivize emission reductions at a time when the world is trying to mobilize all the forces to fight climate change. It represents a crucial step towards a more sustainable future, and it encourages the adoption of more methods to reduce GHG emissions. Additionally, considering the fact that almost all of the criticisms facing carbon credits are due to the lack of a well-established management mechanism, more standardized frameworks formed through multilateral cooperation will definitely help it to maximize its potential.

Case Study: Australia's carbon credit scheme

Australia's carbon credit scheme was undermined by new research, which found a world-leading reforestation project had been an underperforming "catastrophe".

Australis’s offsets program was "one of the world's largest" natural carbon offset projects.Australia’s offsets program is the world’s fifth biggest nature-based offsets program, with projects covering nearly 42m hectares, an area larger than Japan.

Claims made by the Study

  • No change in tree cover: The most popular technique used to create offsets in Australia, known as “human-induced regeneration” and pledged to regenerate scrubby outback forests, had mostly not improved tree cover as promised between about 2015 and 2022.
    • Forest cover had either barely grown or gone backwards in nearly 80%.
  • No reduction in emission: These projects were therefore not reducing emissions as promised, and polluting companies that bought offsets created through these projects were often not reducing their impact on theclimate as they claimed.
  • Questionable credits: Despite this, Australia had used these projects to bank millions of tonnes in questionable carbon credits, which are used to supposedly offset polluting industries.

The researchers called on the Australian government to stop issuing carbon credits to regeneration projects in un-cleared areas “for the sake of the integrity of Australia’s carbon market and the country’s decarbonisation efforts”.



Q: Should the pursuit of carbon credit and clean development mechanisms set up under UNFCCC be maintained even though there has been a massive slide in the value of carbon credit? Discuss with respect to India’s energy needs for economic growth. (UPSC 2014)

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