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At the ongoing 27th Climate Conference in Egypt, the US unveiled a new organic trade plan. Its stated aim is to increase private investment in clean energy projects in developing countries.
In the long term, it aims to lead poor countries to switch to renewable energy production and increase resilience to climate impacts.
Nigeria and Chile have shown interest in the project. India had talked about entering the organic market in the energy bill last August. Some African countries have taken such a step.
Climate finance, they plan to sell organic credits to support the economies of countries on the African continent.
An organic market is to put a price on greenhouse gas emissions and turn them into a commodity. India is said to have the potential to become the largest beneficiary of organic trade. India has reported in Nationally Determined Contributions (NDCs) that it is building organic reserves of between 2.5 and 3 billion tonnes.
What is organic marketing?
Not if the organic market is a new system. It began in 1997 with the UN’s Kyoto Protocol on Climate Change.
A group of developed countries pledged to reduce and control their greenhouse gas emissions.
At that time, the organic market paved the way to create a pure development system. This led countries that failed to meet mandatory emission reduction targets to finance emission reduction programs in developing countries and claim the organic matter captured there.
“Kyoto agreement is the beginning of this. A particular country may not emit organic gases. But the pollution caused by other countries affects the whole earth.
Its aim is to reduce and control pollution by the world’s nations. For that, the countries of the world are urged to reduce organic emissions to a certain level.
Since it cannot be done immediately, annual targets are set. One party has not been able to reduce organic emissions enough to meet the specified target.
But if the other party has reduced more than the required amount, the party that has not reduced organic emissions can buy organics as credit from those who have reduced beyond their regulatory level and account for the fact that they have also reduced,” says economist V. Nagappan.
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In January 2005, the European Union launched the world’s first international Emission Trading System.
China launched the world’s largest emissions trading system in 2021. It is estimated to account for one-seventh of global organic emissions from burning fossil fuels.
India, in its latest energy bill, has talked about creating an organic credit trading scheme. Polluters can exchange credits equivalent to a certain amount of emissions.
The organic market will initially be voluntary. But there are plans to introduce a compulsory trading system.
Economic incentives to reduce organic emissions
On the one hand, the question arises as to whether this will benefit entrepreneurs in all corners of the country.
At the same time, the question arises as to whether there is an opportunity for firms with higher organic output to receive and release their remaining organic emissions in the organic trade when they release less organic emissions.
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Last June 22, the EU Parliament in Brussels voted on the revision of the EU Emissions Trading System.
Entrepreneurs in India’s hinterlands can also get involved, says Aman Srivastava, a climate economist at the Center for Policy Research who is currently at the 27th Climate Conference in Egypt.
He said, “If a local entrepreneur’s business has emissions below the benchmark for that sector or relatively reduces emissions, they can sell organic credits in the market to increase revenue. “Organic trade can provide a low-cost way to effectively reduce emissions,” he said.
Speaking further, “However, for local entrepreneurs who are not fully aware of the organic market and how it works, the regulatory burden can be overwhelming. They will have to undertake emission monitoring and the cost of setting up the infrastructure to record it.
They may not be able to afford technologies especially for organic removal. Such costs harm the business of local entrepreneurs. This may affect the employment of such companies.
Businesses have an economic incentive to reduce organic emissions. Few industries can achieve this transition quickly because of the role they play in the economy. “While some industries may struggle to achieve this transition,” he said.
At the same time, “It is not only companies that can be involved in this organic business method. “If a community of people engages in community forestry on an acre of land and plants trees to form a forest or undertakes any organic capture activities through horticultural activities, the organic captured through their activities can be sold as credit,” says V. Nagappan.
Countries of the world that do not agree
After talks at the 27th climate conference in Egypt, world nations failed to reach an agreement on the details and terms of a global trade in organic credits, Reuters news agency reported.
Carbon offsets allow other countries or companies to pay for reducing greenhouse gas emissions. Companies are already trading organic replacement credits on private markets.
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The Organic Emissions Trading Market was launched on 16 July 2021 at the Shanghai Environment and Energy Exchange Building, China.
In this case, Article 6 of the Paris Agreement could allow countries to set rules that could help countries achieve some of their national climate targets by purchasing such credits.
It was hoped that international standards that could be adopted by the world’s nations could help develop programs to reduce organic emissions.
But countries around the world are yet to come to an agreement on defining what the rules should be, what programs are appropriate, and how to ensure that they have a positive impact in practice.
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In this organic trade, not only companies, but also any individual, community or group involved in organic capture or organic reduction activities such as renewable energy production, afforestation, can be certified for their organic credits and engage in trade.
Is organic marketing dangerous?
A company releases 100 tons of organic matter. Of that, it offsets its emissions by reducing 40 tons of organic output by implementing measures to capture 40 tons of organic matter or through some other technological innovation.
On the other hand, a company emits 200 tons of organic matter. But the regulations say it should release 120 tonnes. Now he is buying 80 tonnes of organic matter from two companies similar to the previous one.
So he can publish the organic volume he paid and received at this place. Because he has already spent on organic capture in exchange for the 80 tonnes of organic he will release.
In this, “A market consists of a supplier and a buyer. That is perfect for why one needs absorbed organic matter. But the distributors need space to carry out the work of capturing 40 tons of organic gas.
They will go to the people to arrange such land.
It can happen not only on land but also in sea area. The process of organic absorption is many times greater in the ocean than on land. In that case, imagine how many companies could split and sell the captured organic volume with that.
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This creates a new market. Not only governments but also private companies can be involved in this. For example, India has 24 percent forest cover. Many of them absorb tons of organic matter.
It can be allocated to companies and traded through an emissions trading system. It also commodifies greenhouse gases that accelerate global warming.
“Therefore, rather than having a major impact on organic output, there will be a huge land and sea grab,” says Sridhar, an expert who has studied the blue economy.
When asked if this trading system allows companies with large organic emissions to buy organic allowances from companies that have regulated their emissions and thereby escape emissions regulation, he said, “Some companies can buy organic credits. So unless limits on emissions are periodically tightened, organic emissions can continue to be chewed up. At this point the question arises as to what the emission limits for greenhouse gas emissions will be.
OK if they are stable. Otherwise, if it is based on the intensity of emissions, even if intensity limits are tightened as in China’s emissions trading system, emissions limits may continue to increase over time as companies increase their production,” he said.
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