Okay, this will sound strange, but carbon trading in its current form, is an ineffective way of dealing with Carbon emissions. Before we dig into this much debated subject, read this, "The Kyoto Protocol of 1997 by which all countries are required to reduce their greenhouse gas emissions by 5% --from 1990 levels-- in the next ten years, ie 2012—or pay a price to those that do". True to its word, the protocol aims at disincentivising carbon emissions. It penalizes the producer of carbon, as he now needs to purchase the carbon credits from others who have saved on carbon emission.
For those saving carbon credits by maintaining and growing forests, it is dream come true, since they now get paid to do so. However, here is the catch. The actual (Real) carbon emissions saved depends upon how the money receieved from the traded carbon, get used! If they use it for activities, which generate more carbon, the equation falls back to square one!
Say for example, X Corp produces 100 tonnes of excess carbon, which it needs to buy out, in terms of carbon credits. Via a carbon exchange, it purchases 100 tonnes worth carbon credits from say, Powerguda village in India which maintains & grows nearby forests. By this transaction, it appears that 100 tons of carbon was created at one place, and 100 tons of it absorbed/ saved at one end, thus the equation is balanced and no net excess carbon gets generated.
However, look at this: if the village recieved $ 20 per ton, i.e. $2000, it would be important to see how it spends this money? If it spends the money for a local power plant to light up the village or to buy a vehicle, it will invariably add some or more carbon, back to the atmosphere.
Thus it is not necessary, that carbon trading of 100 tons of carbon will eliminate exactly 100 tons of excess carbon from the atmosphere. It could be 100-20=80, 100-50=50, 100-100=0 or 100-120= (-20) tons of carbon in the atmosphere, depending how the revenue from carbon trading is spent! In India, a developing nation, my take it that 80% of that revenue will go into developmental activities, which may not necessarily be carbon efficient.
Think!
-Kaushal
