What are carbon credits?

 In Natural Gas

What are carbon credits? Recently a customer inquired about purchasing a thermal mass flow meter. When I asked him what his application was, he said he needed to measure his CERs or carbon credits. It was then I decided carbon credits or CERs would make a good blog topic.

In 1997 the Kyoto Protocol was adopted in Kyoto Japan as protocols to the UNFCC (United Nations Framework Convention on Climate Change). This treaty is aimed at fighting global warming. While it was adopted in 1997, it was not empowered until 2005, and as of May 2011, 194 parties have signed the treaty. When ratifying this agreement, UNFCC members agree to cap emissions according to the Kyoto Protocol. However, the treaty is legally non-binding.

As part of the Kyoto Protocol, industrialized countries have committed to reducing greenhouse gases (GHG), specifically carbon dioxide, methane, nitrous oxide and sulfur hexafluoride) as well as the gases produced by them.

This treaty employs creative mechanisms which encourage the reduction of greenhouse gas emissions, a factor in global warming. One of the flexible mechanisms within the Kyoto Protocol is the Clean Development Mechanism (CDM). It is this protocol which allows industrialized countries to invest in emission reductions where it is least expensive globally. It also provides the means to sell or trade the CERs (Certified Emission Reductions).

When ratifying the Kyoto Protocol, a demand for CERs is produced. CERs are also more commonly known as carbon credits. A carbon credit is essentially a license for the holder of a credit to produce one ton of carbon dioxide. Credits are only awarded to those parties or organizations that reduce greenhouse gas (GHG) below a specific quota. Those parties which lower emissions can sell their credits to gas emission emitters which could be countries, large commercial entities or power generators.

An appealing opportunity for businesses (like my customer) is to convert their landfill gas or livestock waste to alternative energy. By doing so, they’re reducing greenhouse gas emissions, and if measured correctly, they could receive tradable greenhouse emission credits. The key, of course, is to measure it correctly which is why my customer, a manure manufacturer was inquiring about our thermal mass meters which measure and monitor greenhouse reduction projects to verify tradable credits. 

 

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