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Which of the following is/are the instruments related to carbon credit markets?
1. Certified Emission Reduction (CER)
2. Emission Reduction Unit (ERU)
3. Verified Emission Reduction (VER)
2. Emission Reduction Unit (ERU)
3. Verified Emission Reduction (VER)
Select the correct answer using the code given below.
- a)1 and 2 only
- b)2 and 3 only
- c)3 only
- d)1, 2 and 3
Correct answer is option 'D'. Can you explain this answer?
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Most Upvoted Answer
Which of the following is/are the instruments related to carbon credit...
There are two types of carbon markets:
- Regulatory compliance markets
- The compliance market is used by companies and governments that by law have to account for their GHG emissions. It is regulated by mandatory national, regional or international carbon reduction regimes.
- Voluntary markets
- In the voluntary market, the trade of carbon credits is on a voluntary basis.
- Voluntary carbon credits (VER) are mainly purchased by the private sector.
- Corporate social responsibility (CSR) and public relations are the most common motivations for buying carbon credits. Other reasons are considerations such as certification, reputation and environmental and social benefits.
- Carbon credits on the voluntary markets are called Verified Emission Reductions (VER). Hence option 3 is correct.
- Under Kyoto Protocol, two major mechanisms of regulated carbon trading markets are:
- Clean Development Mechanism (CDM
- Under the Kyoto Protocol developing countries (Non Annex I countries) are not obliged to reduce their GHG emissions, whereas industrialized countries (Annex I countries) have to fulfill specified targets.
- They can achieve these by reducing GHG emissions in their own country; implementing projects to reduce emissions in other countries; or trading.
- An industrialized country implements an emission reduction project in a developing country. This can be afforestation, energy efficiency or a renewable energy project. Because of the uptake or savings of GHGs, carbon credits (CER) are generated.
- The carbon credits from CDM projects are called Certified Emission Reductions (CER). Hence, option 1 is correct.
Joint Implementation (JI)
- Any Annex I country can invest in a project to reduce greenhouse gas emissions in any other Annex I country (referred to as a "Joint Implementation Project") as an alternative to reducing emissions domestically.
- In this way countries can lower the costs of complying with their Kyoto targets by investing in projects where reducing emissions may be cheaper and applying the resulting Emission Reduction Units (ERUs) towards their commitment goal. Hence, option 2 is correct.
- The emission reduction unit (ERU) is an emissions unit issued under a Joint Implementation project.
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Community Answer
Which of the following is/are the instruments related to carbon credit...
The correct answer is option D: 1, 2 and 3.
Instruments related to carbon credit markets include the Certified Emission Reduction (CER), Emission Reduction Unit (ERU), and Verified Emission Reduction (VER).
1. Certified Emission Reduction (CER):
- CERs are a type of carbon credit issued under the Clean Development Mechanism (CDM) of the Kyoto Protocol.
- The CDM allows developed countries to invest in emission reduction projects in developing countries to offset their own emissions.
- The CER is generated when a CDM project reduces or avoids greenhouse gas emissions.
- Each CER represents one tonne of carbon dioxide equivalent (CO2e) emissions reduced or avoided.
- CERs can be bought and sold in the international carbon market.
2. Emission Reduction Unit (ERU):
- ERUs are a type of carbon credit issued under the Joint Implementation (JI) mechanism of the Kyoto Protocol.
- The JI mechanism allows developed countries to invest in emission reduction projects in other developed countries.
- Similar to CERs, ERUs are generated when a JI project reduces or avoids greenhouse gas emissions.
- Each ERU represents one tonne of CO2e emissions reduced or avoided.
- ERUs can be traded in the international carbon market.
3. Verified Emission Reduction (VER):
- VERs are voluntary carbon credits that are not issued under any specific international agreement.
- They are generated by projects that reduce or remove greenhouse gas emissions and are verified by third-party organizations.
- VERs are often used by companies or individuals who voluntarily wish to offset their carbon footprint.
- Each VER represents one tonne of CO2e emissions reduced or avoided.
- VERs can be bought and sold in the voluntary carbon market.
These instruments play a crucial role in carbon credit markets as they provide a means for countries, companies, and individuals to offset their greenhouse gas emissions. By investing in emission reduction projects or purchasing carbon credits, stakeholders can contribute to global efforts to mitigate climate change. The trading of these instruments also promotes international cooperation and financial flows towards sustainable development projects in developing countries.
Instruments related to carbon credit markets include the Certified Emission Reduction (CER), Emission Reduction Unit (ERU), and Verified Emission Reduction (VER).
1. Certified Emission Reduction (CER):
- CERs are a type of carbon credit issued under the Clean Development Mechanism (CDM) of the Kyoto Protocol.
- The CDM allows developed countries to invest in emission reduction projects in developing countries to offset their own emissions.
- The CER is generated when a CDM project reduces or avoids greenhouse gas emissions.
- Each CER represents one tonne of carbon dioxide equivalent (CO2e) emissions reduced or avoided.
- CERs can be bought and sold in the international carbon market.
2. Emission Reduction Unit (ERU):
- ERUs are a type of carbon credit issued under the Joint Implementation (JI) mechanism of the Kyoto Protocol.
- The JI mechanism allows developed countries to invest in emission reduction projects in other developed countries.
- Similar to CERs, ERUs are generated when a JI project reduces or avoids greenhouse gas emissions.
- Each ERU represents one tonne of CO2e emissions reduced or avoided.
- ERUs can be traded in the international carbon market.
3. Verified Emission Reduction (VER):
- VERs are voluntary carbon credits that are not issued under any specific international agreement.
- They are generated by projects that reduce or remove greenhouse gas emissions and are verified by third-party organizations.
- VERs are often used by companies or individuals who voluntarily wish to offset their carbon footprint.
- Each VER represents one tonne of CO2e emissions reduced or avoided.
- VERs can be bought and sold in the voluntary carbon market.
These instruments play a crucial role in carbon credit markets as they provide a means for countries, companies, and individuals to offset their greenhouse gas emissions. By investing in emission reduction projects or purchasing carbon credits, stakeholders can contribute to global efforts to mitigate climate change. The trading of these instruments also promotes international cooperation and financial flows towards sustainable development projects in developing countries.
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