147
6
leading to dispossession of local farmers and causing local conflicts (e.g. Lyons
and Westoby 2014). The Swedish Energy Agency had a carbon credit agreement
with Green Resources, which they terminated in 2020 due to the negative impacts
that had been exposed.
The third type of carbon trade is sometimes called quota trading. As in the two
other types, the trade concerns tons of CO 2 equivalents. The participating actors
are companies that buy and sell carbon credits with each other.
The EU started with such a system in 2005 (Emission Trading Scheme—ETS),
and it involves nearly half of the EU’s climate emissions. Norway has participated
in ETS since 2008, and about half of the carbon emissions in Norway in 2017 came
from 140 companies in industrial sectors, which the government decided should
take part in ETS. About 11,000 participating companies in ETS can buy and sell
carbon credits to each other. A company that wants to emit more than the carbon
credits it possesses, can do so if it purchases the necessary amount of carbon
credits from other companies. On the other side, a company can carry out emission
cuts and thereby sell their excess of carbon credits. The idea is that this will imply
that the cheapest cuts will be made first, and that the money spent will result in the
largest possible emission cuts (Norway’s Ministry of Climate and Environment
2017).
ETS is based on ‘cap-and-trade’, which implies that a ‘cap’ in terms of amounts
of carbon credits is gradually reduced. EU has decided to make a 2.2% reduction
of carbon credits in ETS each year during 2021–2030. ETS is the largest system for
quota trade. Other similar systems have been established in for instance California,
Quebec, and in South Korea and Japan, while it is on its way in China.
Let us summarize the three forms of carbon trade and the various types of
involved actors. First, voluntary markets imply that anybody on a voluntary basis
can buy carbon credits from somebody who mitigates climate emissions, and in
many cases, these mitigations are related to forests. The UN is in charge of the
second type through CDM, and this is often trade between countries in the Global
North as buyers, while sellers are enterprises in the Global South. One of the
requirements for approval of this type of carbon trade is that the emission cuts or
carbon capture in question are results of the carbon trade and would not otherwise
have taken place. For countries in the Global North, purchasing such carbon credits can contribute to the fulfilment of the country’s obligations according to international climate agreements. Quota trade constitutes the third type, and here the
trade takes place between enterprises that all have large carbon emissions. These
enterprises are required to be a part of the quota trade market, and a cap on the
total number of carbon emissions is gradually lowered over the years, in order to
gradually reduce the emissions of greenhouse gases. Countries like Norway use
quota trade as a way to fulfil their international obligations for emission cuts.
Apart from the buyers and sellers of carbon credits, carbon trade also involves a
large apparatus of public and private actors who administer, regulate, investigate,
control and assist the exchanges between buyers and sellers.
6.7 · Three Types of Carbon Trade
6
leading to dispossession of local farmers and causing local conflicts (e.g. Lyons
and Westoby 2014). The Swedish Energy Agency had a carbon credit agreement
with Green Resources, which they terminated in 2020 due to the negative impacts
that had been exposed.
The third type of carbon trade is sometimes called quota trading. As in the two
other types, the trade concerns tons of CO 2 equivalents. The participating actors
are companies that buy and sell carbon credits with each other.
The EU started with such a system in 2005 (Emission Trading Scheme—ETS),
and it involves nearly half of the EU’s climate emissions. Norway has participated
in ETS since 2008, and about half of the carbon emissions in Norway in 2017 came
from 140 companies in industrial sectors, which the government decided should
take part in ETS. About 11,000 participating companies in ETS can buy and sell
carbon credits to each other. A company that wants to emit more than the carbon
credits it possesses, can do so if it purchases the necessary amount of carbon
credits from other companies. On the other side, a company can carry out emission
cuts and thereby sell their excess of carbon credits. The idea is that this will imply
that the cheapest cuts will be made first, and that the money spent will result in the
largest possible emission cuts (Norway’s Ministry of Climate and Environment
2017).
ETS is based on ‘cap-and-trade’, which implies that a ‘cap’ in terms of amounts
of carbon credits is gradually reduced. EU has decided to make a 2.2% reduction
of carbon credits in ETS each year during 2021–2030. ETS is the largest system for
quota trade. Other similar systems have been established in for instance California,
Quebec, and in South Korea and Japan, while it is on its way in China.
Let us summarize the three forms of carbon trade and the various types of
involved actors. First, voluntary markets imply that anybody on a voluntary basis
can buy carbon credits from somebody who mitigates climate emissions, and in
many cases, these mitigations are related to forests. The UN is in charge of the
second type through CDM, and this is often trade between countries in the Global
North as buyers, while sellers are enterprises in the Global South. One of the
requirements for approval of this type of carbon trade is that the emission cuts or
carbon capture in question are results of the carbon trade and would not otherwise
have taken place. For countries in the Global North, purchasing such carbon credits can contribute to the fulfilment of the country’s obligations according to international climate agreements. Quota trade constitutes the third type, and here the
trade takes place between enterprises that all have large carbon emissions. These
enterprises are required to be a part of the quota trade market, and a cap on the
total number of carbon emissions is gradually lowered over the years, in order to
gradually reduce the emissions of greenhouse gases. Countries like Norway use
quota trade as a way to fulfil their international obligations for emission cuts.
Apart from the buyers and sellers of carbon credits, carbon trade also involves a
large apparatus of public and private actors who administer, regulate, investigate,
control and assist the exchanges between buyers and sellers.
6.7 · Three Types of Carbon Trade