Abstract

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.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• 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 carbon footprint.: Ev

Keywords

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