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Carbon Credits: A masterstroke not used well enough.

How do you control these businesses from polluting the environment? The problem of climate change is not a micro-problem anymore. It is at a macro scale. Individual efforts are necessary to stop climate change. That is true. But even well-made individual efforts will fall short of our requirements. The bigger problems require bigger actions to tackle them.

This is one of the biggest issues faced by us today. The businesses operate independently. You can't force them to do nature conservation. But at the end of the day, It is humans who run the business. The only thing that can be used to play with them is money or reputation. Making money is the biggest and the most important motive of their business.

As businesses by their very nature - are profit-driven, they would go to any extent to get those profits. Although they might say that they care about the environment, it is more often a marketing gimmick (unless some businessmen genuinely feel the need to conserve nature). These marketing gimmicks are used to generate better goodwill in the market.

So, what if we handle these businesses in the language they understand?

That is what the European Union and other countries have come up with. These businesses only understand the language of money. So, let's control them with money. Our main motive is to promote nature conservation through any means. How that happens doesn't matter as long as the goal is achieved.

This is how the concept of carbon credits came up. The method through which governments can control businesses through money. Limits have been set up for the maximum amount of carbon emissions a business can emit. The government says that anyone crossing this threshold will bear many legal problems along with fines. The government creates tokens or credits for this purpose. Hence, the limit is determined by the number of credits or tokens. One government would have 100 tokens as the limit, whereas the might have a limit of 200 tokens. And each token or credit will be associated with a certain volume of carbon emissions.

Let's see this with the help of an example:

Let's say that the regulatory limit is 100. Now there will be two cases here. There will be one company that will have carbon emissions below the limit. The other one will have carbon emissions above the limit. If company A has carbon emissions equalling 70 tokens, it is well below the regulatory limits. Hence it is safe. The other company B has carbon emissions equalling 130 tokens. This puts them in regulatory trouble now. So, what they can do now is that company B can buy 30 tokens from company A in exchange for money. This means that company B now has sufficient tokens with it. Hence, it is saved from regulatory consequences. To facilitate this buying and selling of tokens, the government has given the option of selling these tokens in exchange for money. They have also set up special Carbon Markets for this purpose.

If company B fails to buy credits from other companies due to any reason, it will then have to face regulatory issues. Hence, either the high carbon-emitting companies face huge costs for their emissions or they go through regulatory troubles which might even put the existence of their business at risk. So, eventually, the companies are left with the only option to reduce their carbon emissions to reduce their financial burden.

This seems to be a great initiative at first. The low carbon-emitting companies get extra revenue for their responsible actions and high carbon-emitting companies face high costs.

But there's a catch. Despite all this great system, Companies always find a loophole in it. Currently, the high carbon-emitting companies find it better to buy tokens than to change their actions. This is because the prices of these carbon credits/ tokens are low. It is not up to the level that would force the companies to put serious thought into reducing this cost. They can afford it, so they buy the credits and continue with their high carbon-emitting practices.

To tackle this, the regulatory bodies and the government have promised to make the prices of these carbon credits higher. And yes, they are delivering on it. But very slowly. We need more pace. Also, the punishments for lack of carbon credits are not that harmful right now. They can get away with it.

No doubt this is a great system that is being established. And we need more speed in this field. Similar initiatives were taken by the US government earlier as well. When they had pledged to reduce sulphur dioxide emissions that were causing acid rain. And they were successful in it. Similar carbon markets have been established in China as well.

The World is rising to the challenge. And you too have to take part. The World needs all of us to step up.

Now is the time to,

Do it earthily!


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