Sometimes, carbon offsetting helps to fund a cut in emissions elsewhere, like preventing deforestation– it helps countries that struggle to meet their emission reduction target or want to pursue less expensive emissions cuts.
The EU and other countries seek to avoid double-counting, in which emission reductions are counted twice: first by the country that purchased the credit and again by the country where the emission reduction occurred.
For example, one country paying another to build a renewable energy project would reduce emissions, while allowing the second country to benefit from cleaner energy.
Carbon credits are part of the ambitious ‘cap-and-trade’ programme, a market-based approach to control pollution and ward off climate change.
Also, the global carbon credit market is still nascent; countries have not yet reached a consensus on how to facilitate transparent and efficient trading of credits allocated to each country under the United Nations Framework Convention on Climate Change .
In his speech at the UN Climate Ambition Summit in December 2020, Prime Minister Narendra Modi said India had reduced its emissions intensity by 21 per cent since 2005.
In India, coal meets a lion’s share of power demand, even as 20 crore people live without access to grid-based electricity.
Carbon credits and other eco-friendly, market-driven regulations may solve urgent environmental problems. But in the long term, the cure could become as bad as the disease.
It is, however, important that there is some form of regularisation and accountability when it comes to carbon credit trading– critics of the non-compliance market have pointed out that overall emission of greenhouse gases isn’t lowered, especially if a company buys carbon credits from a business outside of a regulated exchange.
Another fallback, critics point out, is a surge in investments in carbon credit trading, which could lead to an inflation in prices of carbon credit.
The World Economic Forum, in a report, says Europe’s most energy-intensive industries, including airlines have been using carbon credits to meet mandatory limits on their emissions under the EU Emissions Trading Scheme .