Carbon Credits: Promoting Sustainable Development or Trading in Pollution?
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
This case is about carbon credits and their role in promoting
sustainable development by reducing carbon emissions. Carbon credits are
certificates issued to countries that reduce their emission of Green House Gases
(GHGs) responsible for global warming. They are measured in units of Certified
Emission Reductions (CERs). Each CER was equivalent to one ton of CO2 reduced.
Generally, for each ton of CO2 emission avoided, an entity would get a CER which
could be sold through a futures market to commercial and individual customers
interested in reducing their carbon footprint. This case discusses the Kyoto
Protocol and its objectives. Under the Kyoto Protocol, industrialized countries
had to cut down their GHG emissions to 5.2% below 1990 levels by 2008 to 2012.
As of 2008, the protocol had been signed by 180 countries.
The aim of the protocol was to reduce overall emissions of six GHGs that led to
climate change. The case explains the need for emissions trading and how it
contributes to a reduction in emission levels. Businesses could exchange, buy,
or sell carbon credits in international markets at the prevailing market price.
The case also talks about the pros and cons of carbon trading and discusses the
growth of carbon trading markets in the world. Some experts felt that carbon
trading was the most cost-effective way of lowering CO2 emissions in the
atmosphere. By treating emissions as a market commodity it was easier for
businesses to manage their emission levels and the concept of carbon trading
offered companies, countries, and individuals a financial incentive to produce
less CO2. In the emissions trading market, European companies were the biggest
buyers of carbon credits while companies in China and India were the biggest
sellers. The case discusses the criticism related to carbon trading and the need
to regulate these markets. It concludes with a brief description about the
future prospects of the carbon trading market.
» Study the carbon credits and the fast growing carbon trading market.
» Understand the importance of carbon trading and its relevance to sustainable development.
» Analyze the role of carbon credits and carbon trading in reducing global
» Evaluate the pros and cons of carbon trading.
Sustainable development, Environmental responsibility, Public policy, Carbon credits, Emissions trading, Global Warming, Green House Gases (GHG), Certified Emission Reduction (CER), Kyoto Protocol, Clean Development Mechanism (CDM), Carbon markets, Global Warming Potential (GWP), International Emission Trading (IET), Climate change, Climate Exchange, Cap-and-trade system, Carbon offsets, CO2 emissions, Carbon trading
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