| Quite simply, you pay money to account for each | | | | Convention on Climate Change, and is therefore |
| tonne of carbon dioxide; or one of the other 5 | | | | synonymous with raising global awareness about |
| common environmental pollutants that you create. | | | | climate change. |
| 'You' can refer to individuals, corporations or | | | | Typically, companies who explore, produce and |
| political entities. So say, for example, that I | | | | promote alternate energy sources such as wind, |
| generate 10 tonnes of carbon dioxide per year, | | | | solar and geothermal energy sell carbon credits. |
| and each carbon credit costs $20 per tonne. I | | | | Other organizations with available carbon credits |
| would have to pay $200 to be carbon neutral; | | | | include companies that destroy carbon dioxide or |
| meaning, that I am paying a fee for each tonne | | | | other greenhouse gases directly. Carbon dioxide |
| of greenhouse gases I produce and this fee | | | | sequestration is the process of converting CO2 |
| contributes to products that either sequester | | | | gas into a solid form by chemical or physical |
| carbon, or invest in green, renewable energy | | | | means. For example, carbon dioxide combined |
| projects. To summarize, I produce 10 tonnes of | | | | with quick lime (calcium oxide) forms limestone |
| carbon and I pay to have ten tonnes removed | | | | that can be used in construction projects. |
| from our atmosphere. | | | | The Clean Development Mechanism is a governing |
| The Kyoto Protocol was initiated by the United | | | | set of rules set by the Kyoto Protocol to |
| Nations Framework Convention on Climate | | | | determine which companies and projects can |
| Change and ratified (agreed to in principle) by 181 | | | | generate carbon credits. |
| countries and the European Union as a whole, | | | | This is necessary because anyone who sets up a |
| individual entity in 1997, and was put into effect in | | | | company could promise that they were |
| 2005. This protocol was proposed by the | | | | developing/using/investing in alternative energy |
| international community to address and reduce | | | | sources, start selling carbon credits and make out |
| greenhouse gas emissions that have led to global | | | | like bandits while doing nothing to stop climate |
| climate change. Member countries are placed into | | | | change. The CDM is not the only regulatory body |
| different categories; Annex I countries make up | | | | to certify carbon credits, but they are the most |
| the industrialized nations. Annex II countries are | | | | well known. If you are purchasing a CDM certfied |
| developed countries that provide financial support | | | | carbon credit, you know that you are investing in |
| to the developing countries. The Annex II | | | | a company that has been thoroughly investigated |
| grouping consists of countries that are members | | | | and approved by the UN. |
| of the Organization for Economic Co-operation | | | | The other carbon credit certification bodies include |
| and Development. | | | | the Chicago Climate Exchange, the Western |
| The third and final category makes up the | | | | Climate Initiative, and the Regional Greenhouse |
| developing nations, who have no limitations on | | | | Gas Initiative in the northeastern U.S. In addition, |
| greenhouse gas emissions as emissions are an | | | | there are various standards bodies who set the |
| essential byproduct to building a stable economy | | | | carbon emission bar such as the Chicago Climate |
| and raising their citizens out of poverty. Once | | | | Exchange, the Voluntary Carbon Standard and the |
| these countries become 'developed' they are then | | | | CDM Gold Standard (based on the Kyoto |
| subject to the greenhouse caps that Annex I and | | | | Protocol). |
| II countries currently have. Many countries are | | | | Key to the establishment of carbon credit |
| both Annex I and II countries. The allowable | | | | generation is the concept of additionality. This |
| emissions for member countries are between 6 | | | | principle is that a carbon credit isn't truly |
| and 8% less than their 1990 emission levels; | | | | environmentally beneficial unless the carbon credit |
| meaning the limit is different for every member | | | | producer would not have been able to reduce |
| country; keeping in mind that developing nations | | | | emissions or invest in researching renewable |
| are exempt from emission caps and are ineligible | | | | energy sources without the money given to them |
| to sell carbon credits. | | | | from carbon credits. This avoids giving money to |
| It is up to each individual country to regulate their | | | | organizations that would be doing the exact same |
| industrial outputs to meet the 1990 levels of | | | | business regardless of income from carbon |
| emissions. Although the Kyoto meeting was one | | | | credits. To summarize, the money your company |
| of many meetings that took place in the | | | | earns from carbon credits must be put to |
| COP(Conference of Parties), it is the most well | | | | additional greenhouse gas reducing initiatives. Who |
| known because it is the conference that made | | | | makes the decision about additionality? The CDM |
| countries legally liable for exceeding allowable | | | | board has established a set of guidelnes by which |
| greenhouse emissions. The Kyoto Accord is the | | | | they certify a company for selling carbon credits. |
| teeth in the United Nations Framework | | | | |