Carbon Credit Law
Because carbon emissions are considered a leading cause of global warming, carbon credits are one way governments and individuals concerned about the environment hope to reduce the amount of carbon emissions that industrial companies release into the atmosphere. In the future, legally binding carbon credit laws will augment the voluntary agreements currently in place and represent a step toward establishing environmentally sustainable industrial practices.
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Definition
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Proposed carbon credit laws would be based on international treaties that establish a maximum cap on carbon emissions for each nation. National governments then sell carbon credits to industries and corporations that produce carbon emissions. Each carbon credit allows the holder to produce one ton of carbon. Companies may buy and sell carbon credits on the open market and face penalties for exceeding their own carbon emissions limit.
Implementation
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One of the challenges behind implementing any carbon credit law is the need for international cooperation. The Kyoto Protocol, which is one of the most sweeping and widely adopted environmental treaties ever devised, sets out a framework for a carbon credit program. However, the absence of the United States, one of the most highly industrialized nations in the world, reduces the effectiveness of the law. Small-scale carbon credit laws are easier to implement and can help an individual nation reduce its environmental impact.
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Purpose
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Besides capping the current level of carbon emissions, a carbon credit law's purpose is to reduce the amount of carbon emitted into the atmosphere in the long term. Over time, nations may reduce the number of carbon credits they sell, forcing companies to find new ways to operate without producing carbon emissions in high quantities. Carbon credit laws also reward companies that implement clean technology early on, freeing them from the need to buy credits or allowing them to sell their own credits to competitors who have not taken steps to reduce their emissions.
Enforcement
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Another challenge of a carbon credit law is effective enforcement. The treaty that caps emissions must also spell out penalties for carbon producers that exceed the limit for the number of credits they hold. Measuring carbon emissions is difficult, and the cost of enforcement is high as it means monitoring every factory and carbon-producing facility in every member nation.
Advantages
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A carbon credit law has several advantages over other methods for reducing carbon emissions. It is an incentive-based system, giving individual companies a reason to invest in new technologies that have less harmful impacts on the environment. It also encourages private development of new carbon-reducing methods, since companies will be more likely to invest in such products. Finally, a carbon credit law gives governments a mechanism for reducing carbon emissions over time to meet targeted goals on a mutual schedule.
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