Carbon credit refers to a permit allowing a company or state to emit a ton of carbon dioxide awarded to firms that have decreased the emission of greenhouse gasses below their quota. It follows that a country that produces carbon beyond its quota needs to purchase carbon credits from the energy-efficient ones (those producing less) in what economists call “cap-and-trade.” Although most people believe that the cap-and-trade on carbon emission works, I think this is a false assumption.
Some economists opine that funds raised from trading on carbon credits would help them come up with alternative fuels reducing the emission of carbon dioxide. The arising question is whether doing so helps in reducing the mission because carbon credits sold means producing more by the holder of the permit. The notion that some firms should work towards reducing the production of carbon dioxide while others should not give a false sense of conserving the environment. The net reduction of the carbon emission becomes zero if the firms that adopt green energy sells carbon credits to other companies to produce "on their behalf." Moreover, is economically ridiculous to keep on purchasing carbon credits instead on investing the money in changing the energy source(s) that would not only reduce the cost of operation but also give the company a positive reputation to the clients and shareholders.
Carbon credits are a license to do wrong and believe someone else would clean up the mess just because one can pay. I believe that this a “legal form of impunity” whereby a company can bypass policy regulations on the production of greenhouse gasses. The best practice in reducing environmental pollution should involve all businesses if at all we expect any significant results. It follows that allowing firms to purchase carbon credits defeats all other policies requiring companies to move towards green energy.
A state like California seems to be unrealistic in trading the carbon credits. The Californian Air Resources Board was set to auction carbon credits in May 2016. The state aimed at raising $500 million but has since raised only $10 million with little hopes of achieving the target (California’s Cap-and-Trade Bubble). It is imperative that the local governments may not be keen on reducing carbon dioxide emission but making money to fund other projects.
Besides, the cost of carbon credits is not punitive enough. Fundamentally, producing carbon dioxide above the quota ought to attract considerably high penalties that would act as a deterrence. However, with a cost of $12.46 as of May 27, 2016, in California (CaliforniaCarbon.info.), it is imperative that the companies would not work towards reducing emission because it is cheap to surpass their quotas by buying carbon credits.
Moreover, there are little regulations on the trade of carbon credits (Muller). Because it is an emerging concept, there are few regulations especially on tracking the use of the funds raised. Without proper regulations, there is little the nations, and the world can gain from the carbon credits business regarding the reduction of the emission of carbon dioxide.
I believe that the idea of carbon credit is not economically sound in the perspective of conserving the environment, and therefore, the regulation bodies should stop the trade. In this way, firms would have to abide by the other policies that usually attract fines forcing them to adopt clean energy. Other alternatives may include increasing the costs of the carbon credit such that they would act as a deterrence. The latter should also accompany stringent policies directing how firms should spend the funds accrued from trading on the carbon credits.
Works cited
"CaliforniaCarbon.info." 27 May 2016. Web. 01 June 2016. <http://californiacarbon.info/>.
"California's Cap-and-Trade Bubble." WSJ. 30 May 2016. Web. 01 June 2016. <http://www.wsj.com/articles/californias-cap-and-trade-bubble-1464643546>.
Muller, Karen. "The Pros & Cons of Carbon Credits ~." Sustainable-sphere. Web. 01 June 2016. <http://www.sustainable-sphere.com/2012/10/the-pros-cons-of-carbon-credits.html>.
