The purpose of this article is, first, to provide a grounded understanding of the nature of the offset market, a tendency toward carbon neutrality as a possible point of equilibrium, and the ethical tensions that surround it from the perspective of the consuming public. At this point in the evolution of the market, only a handful of offset provider-rating schemes exist and, even these systems leave consumers with few answers when they seek to find a means by which to ensure that the said systems are having their intended impact. To the contrary, the media warns that a relative ‘‘cowboy’’ atmosphere prevails in the current environment, and that there are ‘‘widespread instances of people and organizations buying worthless credits that do not yield any reductions in carbon emissions’’ (Harvey and Fidler, Financial Times, 2007). Owing to the lack of technical literacy of some stakeholders who participate in the market, no common quality or certification structure has yet emerged for providers. Though the market is a relatively new one, numerous offset providers have quickly emerged under both regulated and voluntary regimes. In this article, we explore the world’s response to the increasing impact of carbon emissions on the sobering threat posed by global warming: the carbon offset market. We believe that once the target audience understands key market concepts, it would be much easier for them to access more technical literature on these issues. In order to maintain simplicity, we focus on the main aspects of the carbon market - the way trading takes place, differentiating between carbon sequestration and maintenance of forest carbon stocks, and the role of carbon standards. The appendix at the end provides a list of useful sources to access additional material on any of the topics covered. For instance why is someone willing to pay for not cutting down trees (or for planting new ones) when that person (or company) is not even located in the same country? Or why don’t we see many forest carbon projects even when international carbon markets are now worth billions of dollars? We attempt to answer these questions by using key economic concepts such as cap and trade that help generate carbon offsets, and by explaining how international carbon markets are further segregated into voluntary and compliance based markets, each with its own rules on how forest carbon offsets can be traded. Indeed, despite the prolific increase in reference material on ecosystem services, particularly forest carbon services, there is a relative dearth of literature that explains basic concepts in easily accessible language. We also explain why in spite of the surge in international carbon markets, actual trading in forestry carbon offsets remains low. It is important to note that these projects and the resultant offsets are only a part of a long set of solutions that the international community is considering to address climate change. This concept note explains how carbon credits or offsets are generated from the forestry sector - both in terms of growing new trees as well as protecting existing ones, and how they are traded in international markets. Examples include renewable energy projects and shifting from coal fired power plants to hydroelectric ones. There are many ways in which carbon credits are produced. Carbon credits are the currency in which carbon markets deal – a way for market mechanisms to drive industrial and commercial processes in the direction of low emissions of carbon dioxide and other GHGs into the atmosphere. Other greenhouse gases (GHG) such as nitrous oxide and methane too have carbon dioxide equivalents that are used to estimate carbon credits. A carbon offset or credit is equal to a ton of carbon (or 3.67 tons of carbon dioxide) that doesn’t flow into the atmosphere or is absorbed from the atmosphere and retained on earth.
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