- Carbon trading is used to minimize carbon emissions, usually called carbon management.
- Carbon trading is considered as compensation given by developed countries that produce carbon dioxide in their industrial activities to countries that have carbon-absorbing forests.
- This carbon buying and selling business is of interest to bona fide world companies which are obliged to make up for the pollution and increased emissions they do.
Sobat EBT Heroes, have you ever heard about carbon trading? Carbon trading is used to minimize carbon emissions, usually called carbon management. Or briefly, carbon trading is considered as compensation given by developed countries that produce carbon dioxide in their industrial activities to countries that have carbon-absorbing forests.
In 1997, many countries felt restless and worried about the negative impact of increasing greenhouse gas emissions. Therefore, in that year an agreement was implemented in the Kyoto Protocol to agree on a system called carbon trading. As many as 180 countries are committed to implementing this system to keep the earth in good condition.
Currently, it is known that the value of the global carbon market exceeds $175 billion a year and can influence business in all sectors of the economy. This carbon market program has been implemented in many parts of the world such as the European Union, New Zealand, and the states of the United States of America. Many countries are also carrying out further initiatives such as Australia, Canada, Japan, South Korea, and China.
The Benefit of Carbon Trading
Besides having benefits as a way to help reduce greenhouse gas emissions, carbon trading also provides benefits in the financial sector. Countries that succeed in becoming sellers in a carbon trading system can increase their country’s foreign exchange through income from this carbon trading. In addition, the implementation of carbon trading indirectly benefits forests in every country which continue to be preserved and maintained so that they can continue to play a role in the process of carbon sequestration.
Not much different from other sales transactions, in the carbon trading process there are also two important roles, namely buyers and sellers. Buyers in this case are industrial owners who produce carbon dioxide into the atmosphere and have an interest or obligation by law to balance the emissions they emit through carbon sequestration mechanisms. Meanwhile, sellers are owners who manage forests or agricultural land and can sell carbon credits based on the accumulation of carbon contained in the trees in their forest or land.
Carbon Trading Method
Since the signing of the Kyoto Protocol, companies can no longer pollute the air for free. The right to create pollution is converted into a certificate and distributed equally to each company. For example, two factories carry out industrial processes actively and produce carbon emissions in the process. The two factories have the same allotment to produce emissions at level 5. However, in reality, factory A only produces emissions at level 3 while factory B produces emissions at level 7. So, the unused ration by factory A can be sold to factory B which will be used to cover the excess emission allowance. Such a system is called Cap and Trade in carbon trading.
In addition, factory B can also carry out another solution called Clean Development Management (CDM), which is a mechanism to reduce greenhouse gas emissions in which developed carbon-producing countries can participate or cooperate with developing countries. Or in simple terms, these developed countries make environmentally friendly projects in developing countries such as wind power plants in India or solar power in China.
Apart from that, there is also a mechanism called Joint Implementation whose legal basis is regulated in Article 6 of the Kyoto Protocol, this mechanism is implemented between industrial countries which will produce an emission reduction unit or commonly called an Emission Reduction Unit (ERU). In addition, there is a mechanism called Reducing Emissions from Deforestation and Forest Degradation (REDD+). This system requires a corporation to invest funds used to prevent forest destruction in carbon-producing countries.
Carbon Trading in Indonesia
How is carbon trading in Indonesia? As a tropical country, Indonesia is known to have the largest carbon forest conservation area in the world. By seeing this potential, a project called the Katingan Mentaya Project was initiated to manage this potential.
The Katingan Mentaya Peat Swamp Forest Restoration Activity (Katingan Mentaya Project) is managed by an Indonesian national private company, namely PT. Rimba Makmur Utama (RMU). This project protects and restores a 149,800-hectare peat swamp forest ecosystem area, provides a sustainable source of livelihood for local communities, and contributes directly to preventing global climate change. This activity is carried out in Katingan and East Kotawaringin Regencies, Central Kalimantan.
The Katingan Mentaya Project is the largest carbon-trading ecological restoration project in the world. The area is equal to twice that of Singapore. The Indonesian forest business association estimates that our forests are capable of absorbing 5.5 Giga tons of carbon dioxide. Nearly 10% of the world’s carbon credits come from Indonesia. With a forest area of 36.5 million hectares, if it is sold on the carbon market, the figure will reach IDR 1,400 to IDR 1,600 trillion.
This carbon buying and selling business is of interest to bona fide world companies which are obliged to make up for the pollution and increased emissions they do. Like the Dutch oil and gas company, Shell. This company has a campaign in that every cent of the price of gasoline purchased by customers in Europe will be donated to the Katingan Mentaya Project program. Carbon trading offers extraordinary benefits for buyers and sellers, both in terms of the effectiveness of utilization and environmental preservation to economic financial benefits.
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Editor: Gabriel Angeline Farenita Kusuma Putri