CARBON CREDITS: AN UNDERSTANDING IN INDIAN COMPANIES
Vol 21 No 1 (2023): In Progress
Prof. (Dr.) Manish Dhingra, Prof. (Dr.) Vaishali Dhingra
Abstract
Carbon credits as a concept was discussed and formalized in the Kyoto Protocol. In December 1997, the Third Conference of Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC) adopted the Kyoto Protocol. The protocol requires developed and developing countries to limit their Greenhouse Gas (GHG) emissions to individual targets.
The Protocol agreed 'caps' or quotas on the maximum amount of Greenhouse gases that each participating country can produce. In turn these countries set quotas on the emissions of installations run by local business and other organizations, generically termed 'operators'. Countries manage this through their own national 'registries', which are required to be validated and monitored for compliance by the UNFCCC. Each operator has an allowance of credits, where each unit gives the owner the right to emit one metric ton of carbon dioxide or other equivalent green house gases (GHG).
Carbon credits create a market for reducing greenhouse emissions by giving a monetary value to the cost of polluting the air. This means that carbon becomes a cost of business and is seen like other inputs such as raw materials or labor.
The possibilities are endless; hence making it an open market. Operators that have not used up their quotas can sell their unused allowances as carbon credits, while businesses that are about to exceed their quotas can buy the extra allowances as credits, privately or on the open market. As demand for energy grows over time, the total emissions must still stay within the cap, but it allows industry some flexibility and predictability in its planning to accommodate this. The paper intends to explore the existing level of awareness about carbon credits amongst SMEs.
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