Carbon Market and Carbon Credits
As the world looks up to its growing climate crisis, methods to reduce human impact, such as carbon offsetting, are making their way to the forefront.
Carbon markets are trading mechanisms in which carbon credits are sold and bought. One tradable carbon credit equals one ton of carbon dioxide or the equivalent amount of a different greenhouse gas reduced or avoided.
For decades, carbon markets have been seen as part of the solution to climate change.
Types of Carbon Markets
There are broadly two types of carbon markets: compliance and voluntary.
Compliance markets – Created as a result of any national, regional and/or international policy or regulatory requirement.
Voluntary carbon markets – National and International – refer to the issuance, buying and selling of carbon credits, on a voluntary basis.
Australian Clean Energy Regulator
The Clean Energy Regulator is the Government body responsible for administering legislation that will reduce carbon emissions and increase the use of clean energy.
The role of the Clean Energy Regulator is determined by climate change law. The schemes it administers work together to reduce emissions while encouraging business competitiveness while satisfying carbon targets.
Australian Carbon Exchange
The Australian Carbon Exchange, although yet to be developed, will operate in a similar way to online stock exchanges in terms of purchasing, clearing, and settling Australian Carbon Credit Units (ACCUs) and potentially other types of carbon units and certificates.
Australian Carbon Credit Units (ACCUs) are financial instruments awarded to eligible energy efficiency, renewable energy generation, and carbon sequestration projects that result in a reduction of Greenhouse Gas (GHG) emissions.
One ACCU represents the avoidance or removal of one ton of carbon dioxide equivalent (tCO2-e) GHG. The development of an online carbon exchange will support the Australian industry by increasing market transparency, including pricing, reducing transaction costs, and reducing red tape.
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