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Carbon project |
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Carbon project is an initiative that is funded to bring about a reduction in the emission of greenhouse gases. Carbon project is a documentary proof in the form of a document and activity reports which make sure that certain measures will result in permanent reductions in greenhouse gas emissions.
Under the Kyoto protocol, nations need to maintain their green house gases emission levels. Since carbon is the foremost greenhouse gas, most of the attention is paid to it in all the reduced emission plans. The chief reason for development of carbon projects is legal obligations under Greenhouse Gas Cap & Trade program and voluntary environmental stewardship.
Carbon projects have become important today as emissions trading under Phase I of the Kyoto Protocol has given rise to a carbon market. To be able to trade in carbon emission units, an entity needs to get the project validated by an operational entity designated by a CDM (Clean Development Mechanism).
Any entity that has exceeded the limits assigned to them regarding greenhouse gas emissions can opt for paying a “carbon tax” which is a default payment that is set by the regulating authority. Alternately, the entity can purchase carbon credits from other entities, as per the Kyoto Protocol. This system encourages the entity that is causing less pollution and provides a disincentive to those exceeding their limits.
Carbon projects are the third option for such entities. They can invest in a carbon project which will help reduce greenhouse gas emissions. Investing in the project will help the polluting entity mitigate by using the emission reduction units to offset the excess emission caused by it. The polluter can sponsor the project or purchase the project from the developer. This way the polluter has to pay for its excess emissions. The developer or owner of the carbon project is, obviously a gainer.
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