The concept of carbon credit trading has evolved significantly since it was first introduced at the United Nations Framework Convention on Climate Change (UNFCCC) in 1997. Here is a brief overview of the evolution of carbon credit trading:
1997: The concept of carbon credit trading is introduced at the UNFCCC conference in Kyoto, Japan. The Kyoto Protocol, which is adopted at the conference, establishes the first legally binding international agreement to reduce greenhouse gas emissions. Under the Protocol, developed countries agree to reduce their emissions of six greenhouse gases, including carbon dioxide, by an average of 5% below 1990 levels. The Protocol also establishes three market-based mechanisms to help countries achieve their emission reduction targets: the Clean Development Mechanism (CDM), the Joint Implementation (JI), and the International Emissions Trading (IET). These mechanisms allow countries to offset their emissions by purchasing credits from emission reduction projects in other countries.
2005: The first carbon credit trading platform, the European Union Emissions Trading System (EU ETS), is established. The EU ETS is a cap-and-trade system that covers more than 11,000 power stations and industrial plants in the European Union. It allows companies to buy and sell carbon credits in order to meet their emission reduction targets.
2015: The Paris Agreement is adopted at the UNFCCC conference in Paris, France. The Agreement sets a global goal of keeping the increase in global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C. The Agreement also establishes a global market-based mechanism, known as the Sustainable Development Mechanism (SDM), which allows countries to offset their emissions by purchasing credits from emission reduction projects in other countries.
Since its adoption, the Paris Agreement has been ratified by 194 out of 198 Parties to the UNFCCC. In addition, a number of countries have announced ambitious emissions reduction targets and plans to transition to clean energy. For example, the European Union has set a target of achieving carbon neutrality by 2050, and the United States has announced a goal of reducing its emissions by 50-52% below 2005 levels by 2030.
In addition to national efforts, there has also been widespread support for the Paris Agreement from the private sector. Many companies have announced plans to reduce their emissions and adopt renewable energy, and some have committed to achieving carbon neutrality. There has also been a growing trend towards divesting from fossil fuels and investing in clean energy.
Today: Carbon credit trading continues to evolve and expand. In addition to compliance-driven markets, such as the EU ETS, there is also a growing voluntary carbon credit market, which allows individuals and organizations to offset their carbon emissions on a voluntary basis. There are also efforts to increase transparency and standardization in the carbon credit market, through organizations such as the Gold Standard and the Verified Carbon Standard. In addition, there is a growing focus on ensuring the permanence of emission reductions achieved through carbon credits, through projects such as reforestation and soil carbon sequestration. Finally, carbon credit trading is increasingly being integrated with other sustainability efforts, such as energy efficiency improvements and the adoption of renewable energy.