What is carbon trading?


Carbon trading is a market-based system designed to reduce greenhouse gases and carbon emission that contribute to global warming, particularly carbon dioxide emitted by burning fossil fuels.

The scheme allows companies or countries to buy and sell carbon permits, usually firms are given a certain quota for how much they can produce polluting emissions. If they wish to pollute more than their allowance then they have to buy more permits.

If they pollute less than their quota they can sell their spare permits on the market. Thus there is an incentive to reduce pollution and find the most efficient way of dealing with pollution.

Benefits of Carbon Trading

  • It encourages companies and firms to find alternative energy resources: with the carbon tax causing increases in business overheads, companies will be prompted to find more efficient ways to manufacture their products or deliver their services, as it would be beneficial to their bottom line. What’s more, this can even result in more environment-friendly and ingenious ideas across various industries, from logistics to agriculture.

  • It helps increase revenue: Government can raise funds by selling their reserve pollution permits. The revenue can be used to clean up the environment.

  • It creates a new economic resource for industries: carbon trading is based on two specific points: companies will be encouraged to lower their emissions because there is a low cost to do so while companies that have emissions credits can sell them for extra profit. This creates economic resources in both areas because more is spent to lower emissions and the credits are a new product to be purchased for additional profits.

  • There is a predetermined maximum level of emissions: most companies that are not regulated on their emissions aren’t going to care what they release into the atmosphere. This makes it difficult to track atmospheric influences that the emissions may have. By having a predetermined maximum amount that is released, we can have a better idea of what is happening to the atmosphere  while being able to work on reducing the maximum levels over time.

How does QUBE use carbon trading?

Three billion people around the world are still using polluting fuels to cook, addressing this is a major part of the current Sustainable Development Goals. QUBE will be implementing the carbon trading scheme in the Philippines to reduce rice straw pollution and create a cleaner energy.

Our dryQUBE, a dry anaerobic digester, converts stackable feedstocks such as rice straw into biogas, reducing the amount burnt or left to rot in the fields and providing a supply of local clean energy that would be subsidised by the sale of carbon credits.

  • Carbon Saving: each batch will process approximately 640 tonnes of rice straw which will save about 2000 tonnes of carbon.  If traded into an accredited Carbon Saving Scheme, this would have a value of about $32,000 dollars.

  • Provides Clean Energy: each 640 tonne batch will produce about 1.2 million kWh worth of energy in the form of biogas which has a value of about $111,000.

  • Subsidised fuel: by using the traded carbon value of the batch QUBE can subsidise the cost of the fuel by about 30%, making purchase of the biogas competitive and preferable.  

  • Costs Effective: each dryQUBE digester system costs $200,000 and would give a payback of less than 6 years allowing for labour, land and fuel inputs.  This ultimately gives one tonne of rice straw a value of $1.

This is an example of how carbon trading can reduce pollution on two fronts. The dryQUBE scheme incentivises farmers to trade in their waste rice straw for a cleaner source of subsidised fuel for cooking and vehicle fuel. This means that farmers cut down burning rice straw and provide their families with a cleaner energy source.

Alice Bayfield