Now that Australia has delayed the solution to help reduce global carbon emissions, an Emissions Trading Scheme, the need for individuals and businesses to take action has increased. One way to show your environmental concern is to offset carbon. But if you want to make an impact and help reduce global carbon emissions, what is most effective: using RECs or retiring CECs?
Well the answer depends on the design of the compliance market for the CECs (Carbon Emission Credits), the quality of the RECs (Renewable Energy Credits) and the price. With CECs currently much cheaper than RECs the question for a lot of readers is already answered. But let’s compare CECs and RECs and their value as carbon offset tools.
Carbon Offsetting
A REC is a Renewable Energy Certificate, created by a project that reduces the consumption of fossil fuels. Examples include wind turbines or solar panels. They produce renewable energy and as a result less fossil fuel is consumed and therefore less carbon dioxide emitted. That works fine. The RECs help fund the investment in renewable energy, which is needed because coal is so cheap.
A CEC exists because a compliance market has been created to limit the amount of carbon emissions that industry can produce. These compliance markets have existed for a long time in many forms. Compliance markets are commonly known as Carbon Markets, Cap and Trade, or Emissions Trading Schemes. It all amounts to the same concept; a limited pool of credits is available to emitters. So that an emitter needs a credit to emit carbon dioxide, and with fewer credits available, the less carbon dioxide that can be emitted.
Carbon Markets
The largest and leading, world-class market is the European Union Emissions Trading Scheme, which has been in place since 2005. It is the only one that is considered well regulated, with participants fined if they don’t comply. Other active markets include the NSW Greenhouse Gas Reduction Scheme (January 2003), the NZ Emissions Trading Scheme (starts 1 July 2010), the Tokyo Metropolitan Cap and Trade Scheme (April 2010) and the Northeast US states’ Regional Greenhouse Gas Initiative (RGGI) Cap and Trade Scheme (January 2009).
Carbon Retirement
Several companies around the world facilitate the purchase CECs to voluntarily retire/cancel them before they are used to emit carbon dioxide. Paul Gilding, formerly a CEO of Greenpeace International, says that this is “the most pure way to offset”. And fewer CECs means a higher price per tonne of carbon dioxide, all things kept equal. That helps drive investment in low-carbon solutions such as energy efficiencies and renewable energy, as emitters can use the money from the CECs they sell to fund their investments in low-carbon solutions. The higher the price of CECs the easier the decision becomes for an emitter to switch to low-carbon solutions.
So if you are left wondering what to do now that Australia has delayed its carbon market solution to reduce emissions then you should seriously consider carbonretirement. If you want to have an impact on the amount of carbon dioxide industry can emit, then consider the benefits and current low cost of CECs. Note that CECs will not necessarily remain cheap for long, as indicated by the recent price rise of 25%.
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