Challenges for the Implementation of Carbon Credit Market Current Global Scenario

The carbon credit market, which tries to lower greenhouse gas discharge through motivating companies reduce carbon output, is encountering a lot of difficulties in its operations. The fundamental problem is the absence of uniform regulations from place to place thus making it hard o calculate and trade on carbon credits. This fragmentation of regulations serves as a downside to market efficiency and its credibility. Moreover, the accuracy of carbon offset projects greatly worries people. There are concerns that certain projects like reforestation do not really mean what they promise in terms of long term sequestration of these gases into trees and soil. This eventually makes the market lose faith in its integrity.

The verification and monitoring for carbon offset projects is also not easy. Lack of infrastructure as well as resources in a number of areas make it impossible for projects to be clearly seen to cause a reduction in greenhouse gas emissions. These concerns are worsened by possible double-counting where one carbon reduction project may be stated more often than is necessary. Buyers and sellers often have no clear information on the quality of credits they are dealing with, therefore making it difficult for them to know how they are priced. Consequently, this can result into lack of trust and reduced involvement from important players in the forex market.

Small and medium-sized enterprises (SMEs) face yet another problem in the carbon credit market, namely financial accessibility. The high cost of getting into the market can prevent such small entities from participating in it effectively. Additionally, businesses and the general public do not know much about carbon credits since there is little information about them. Hence, there will not be many people interested in it neither will the result of trading on carbon credit be felt widely. Many carbon credit programs are voluntary. The market depends on companies’ good intentions, as they may not be enough to make companies emit significant volumes of greenhouse gases. Carbon credit projects and market operations can also be affected by political and economic uncertainties in certain regions.

 

Sophisticated systems, required for tracking and reporting of emissions reductions, are yet to be available in many regions because of technological challenges including; concern over use of carbon credits which allegedly undermine efforts to fight global warming is also there. Environmentalists propound the idea that when companies buy pollution rights they discourage.

 

In order to deal with these challenges, there is a need for collective international actions aimed at standardizing controls, streamlining vetting procedures, boosting transparency vis-à-vis the market and granting fair market access. It is only through undertaking such broad measures that indeed the carbon credit market may fulfill its promise as a climate change mitigation tool.

Author :Vishvjeet Singh