Emissions Trading Industry Facts and Definitions
(also known as cap and trade) is a market-based approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants.
History of emissions trading
Emissions trading began in the United States, which used cap and trade to reduce acid rain by reducing sulphur dioxide emissions by 43% between 1990 and 2007 at a cost that was 75% lower than estimates when the cap was set. This cap and trade system has been successful in achieving its goals.
include tradable instruments (i.e. credits) generated for developed and emerging environmental markets that include: carbon offset and renewable energy credit trading, mitigation banking, water and nutrient trading, and endangered species banking.
Carbon offset – carbon credit
represents a reduction, avoidance, or removal of one metric ton of carbon dioxide equivalent emissions resulting from a specific project activity that is used to compensate for an equivalent emission occurring elsewhere. One carbon credit represents one metric ton of carbon dioxide (CO2) equivalent (mtCO2e).
Carbon vs. greenhouse gas
There are six regulated greenhouse gases that are attributed to climate change: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, and sulfur hexafluoride. The term “carbon” is used instead of “greenhouse gas” because carbon credits are measured by carbon dioxide equivalencies. For example, methane is 21 times more harmful than carbon dioxide. This means that reducing one metric ton of methane emissions is equal to 21 carbon credits, or 21 mtCO2e.
is a branch of Environmental finance. Carbon finance explores the financial implications of living in a carbon-constrained world, where emissions of carbon dioxide and other greenhouse gases (GHGs) carry a price. The general term is applied to investments in GHG emission reduction projects and the creation (origination) of financial instruments that are tradable on the carbon market.
is the carbon stored in mangroves, seagrass, and coastal wetlands.
Blue carbon finance
can help the preservation and restoration of high-value coastal ecosystems providing multiple environmental services by providing carbon mitigation payments. Blue carbon finance can expedite conservation and restoration through developing wetland offsets that:
- Create funding
- Streamline restoration projects
- Provide co-benefits to communities including jobs and flood protection
Wetland carbon sequestration
Wetland plants capture atmospheric CO2 through photosynthesis. As the plants die and decay, their root mats and other decayed material build up the soil, which results in permanent storage of carbon. When wetlands degrade and turn into open water the carbon stored in the soil can be released back into the atmosphere. Wetland restoration is a critical tool to combat wetland loss, as well as an effective climate change mitigation strategy as it enhances carbon sequestration and prevents carbon release resulting from wetland degradation. Therefore, wetland management and restoration projects can be measured as GHG offsets.
Wetland loss in Louisiana
80% and 90% of the State of Louisiana’s economy, food, and quality of life is linked to Mississippi Delta coastal ecosystem. In addition, the restoration of the Mississippi River Delta is a pressing national priority. Not only is the future of one of the world’s most unique and important ecosystems at stake, but the economic health of much of the United States depends on sustaining the navigation, flood control, energy production, and seafood production functions of the Mississippi Delta and river system. Each of those functions is currently at severe risk due to coastal wetland loss.
The State of Louisiana has some of the fastest rates of wetland loss in the world. The LA coast is losing wetlands at a rate of one football field every hour which amounts to about 24 square miles being lost each year. Currently more than 1,800 square miles have been lost since the 1930’s and the USGS predicts that by 2050, with ‘business as usual’, there will be an additional 700 miles2 of wetland loss. This loss is equivalent to 90,780,000 tons of carbon dioxide or the annual emissions of almost 17 million typical passenger cars!
Benefits of wetland restoration expand beyond carbon sequestration. Wetlands provide:
- A buffer for coastal communities from storm surge
- Commercial and recreational fishing opportunities
- Filtration of pollutants
- Habitat for numerous species of fish and wildlife.
Furthermore, Restore America’s Estuaries released a report that wetland restoration provides more than twice as many jobs as the oil and gas and road construction industries combined.
Chart Based on IPCC LULUCF-Report 2002
G. Seufert , Leader of JRC-Project GHG Data, EU commission