What is the Carbon Trade?

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I am studying the use of Carbon credits in order to better understand its effectiveness in incentivizing companies to reduce their carbon admission so that I can figure out if this is the best way to counterbalance the emission of greenhouse gases. 


Explanation of Carbon Credits 

Carbon credits or carbon offsets are a way of counteracting/reducing someone’s CO2 production with another’s reduction of their carbon footprint. For an example scenario, a company could expect to emit one hundred and twenty units of GHGs of CO2. If a policy is put in place that they need to reduce at least twenty units, then they have to find a way to do that. In the long-term, the goal is for the manufacturer to find ways of producing their product without emitting as many GHGs; to meet its regulatory burden in the short term, it will need to buy carbon offsets to bring its emissions down to its mandate of one hundred units. At the same time a large landowner, like someone who owns timberland, has the potential to be monetized by harvesting for home building or the pulp and paper industry. If the landowner agrees to forgo aggressive timber harvesting on a certain tract of land in perpetuity, it can receive an offset credit that it can sell to the cement manufacturer. The landowner can generate cold, hard cash; the original company that had to reduce a certain amount of units can meet its regulatory mandate.

         This system is fairly complicated and detailed, however, this example might make it easier to follow. U.S. farmers make their living by raising crops from the soil each year. Now with the addition of carbon credits, they can get paid for removing many tons of carbon out of their production industry of farming. The change of practice will cost them in the short term, however, they will be getting paid through the carbon credit program. Even Big agriculture companies including Bayer AG, Nutrien Ltd., and Cargill Inc. are encouraging startups to see if crop producers can adopt climate-friendly practices and develop farming-driven carbon markets. Those efforts would let retailers, food makers, and other companies offset their greenhouse gas emissions by paying farmers for their fields’ capacity to withdraw carbon dioxide from the atmosphere and trap it in the soil. Agricultural companies are criticized for being terrible with the environment in their farming. However, they say that paying farmers to maximize those natural processes can put the scale of modern farming behind a potential climate solution. Farmers, following half a decade of lean crop prices, are contemplating a possible new source of income that is less dependent on weather and agricultural commodity markets. Although farming doesn’t seem to be such a great impact on CO2 production, The Environmental Protection Agency has estimated that the agriculture sector accounts for 10% of U.S. greenhouse gas emissions. Carbon credits can be used in many other ways, like with airlines and factories, however, they follow more of a carbon offset system rather than finding fixes in their own work. 




         Carbon reduction or offsetting is a massive industry that is already helping reduce carbon emissions in its own ways. Carbon credits specifically, already have some success and have more potential. To cut it short now would be a waste of billions of dollars for all that work. However, Carbon credits could use some more backing behind it, so many companies can take advantage of its benefits, but with the government structure of America, it would be difficult to make any major changes to the program at this point. All that matters is that it works for us. It’s a system that has been there for a while and hasn’t had many bumps in the road. Leaving carbon credits alone and not revising them would be in the U.S’s best interest. In a perfect world, America would be able to implant many carbon reduction programs alongside carbon credits to better our earth. Other countries may be better off than the U.S. however I think what’s most important is not comparing our progress with other countries and focusing on how the U.S is going towards a brighter future. If individual states and legislation slowly keep improving to progressively reduce CO2 admissions, then our future of being a leading country in this topic would be a reality. In conclusion, Carbon Credits should become the main carbon offsetting program that should be put in place and have more influence. This would require some legislative change, but it could be done eventually. Americans have few options to choose from so I believe carbon credits are the best option and could work. 



Final questions


1) Is Carbon Credits a reliable way to reduce carbon emissions, what’s your opinion?


2) Could there be a better solution to incentives that reduce carbon? Could they be used in the U.S?


3) If you have any other option over Carbon Credits or just carbon offering, please let me know. 


My work cited can be found here 






Providence day school senior


  1. Excellent presentation! In response to prompt #1, I’m not certain that carbon credits would be entirely beneficial because they may incentivize companies to purchase vast tracts of land in order to redeem carbon credits. If an energy company owns the forests that they earn carbon credits from, they can 1) negotiate their own fuel requirements with regulatory agencies, and 2) displace local landowners, creating “land monopolies” that further commodify the natural world and imperil ecosystems (since they aren’t federally protected areas). You’ve persuaded me that carbon credits are a good emissions-reducing system, but they definitely need some auxiliary reforms to minimize their unintended consequences.

  2. Carbon credits seem to provide a great way for companies to design more sustainable practices, so that is a success. However, these also seem to be ways to allow carbon-heavy industries to continue. I am curious if you believe time and energy would be better spent in innovation or instead in further developing this system of carbon credits.

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