Thailand and Switzerland ink first carbon credit pact

One of the agreements reached at the Paris Climate Summit of 2015 was about carbon trading. It is a system which is simple and transparent. It allowed not just countries – that is, their governments – to trade in carbon credits, but also private companies. Agreements between private companies are much easier and the trade is much simpler. It is an interesting system. A country which is using renewable or green energy sources for its consumption builds up credits, which it can sell to those who are using fossil fuel sources, and at a price.

Each carbon credit is equivalent of one metric ton of carbon dioxide (CO2) emission. It was hoped that countries and companies will be incentivised to turn to green energy and save enough carbon credits to sell it to those who are still emitting CO2, and that this would reach the Net Zero point where the desired target of reducing CO2 emissions is achieved by sale between those who save the credits and by those who emit.

The first such agreement after it was mooted eight years ago has been reached between Thailand’s bus company, Energy Absolute, which runs its fleet of 4,000 in Bangkok on electricity, and a Switzerland fuel importer group, Klik Foundation, with its CO2 emissions. It was signed on Monday.

Klik purchased 1,916 carbon credits. The price for each carbon credit is said to be more than $30, according to Energy Absolute executive Chatrapon Sripratum. He refused to share the exact price. Klik has agreed to buy 1.5 million metric tons of carbon credits through 2030. Klik has to buy 20,000 million credits worth carbon credits to offset its emissions which is equivalent to 40,000 metric tons of CO2.

Sripratum said, “We are pioneers. The market will really bloom in the future. ” There is quite a bit of uncertainty over the modalities and the price mechanism. Klik managing director Marco Berg said, “There’s no clear rule saying how this needs to be done, and in that sense being the first might be an advantage in the long run but, at first, it’s really hard work and also a lot of cost.”

For the ardent environmentalists, the carbon credit system is the most unsatisfactory because it does not reduce and eliminate CO2 emissions which is the way to restore the climate balance from deteriorating further. And carbon credit trading is only shifting the CO2 burden from one point to another instead of reducing it.

The carbon credit system is an incentive to those countries and companies which are adopting green energy systems, while those still using the fuels are buying time by paying for the emissions. It can be viewed as carbon tax, and it would appear that those countries which can pay would not mind doing so, and there is no incentive for them to shift from non-renewable to renewable sources of energy.

But for those who hammered out the carbon credit deal it is a compromise and a compromise which would ultimately lead to the elimination of sources of CO2 emissions. There is also the realistic perception that it would take quite a long time where a complete shift to green energy systems could be achieved, and the carbon credit system is a half-way house as it were.

One of the features if the climate crisis is that it is a very complicated issue and the way to solving the crisis is a long one that involves hard negotiations, difficult decisions and a long time to reach the goals. But a beginning has to be made, and the first steps towards clean energy will be faltering. This is however better than waiting for the ideal solution which every one would agree to implement at the same time.