Carbon Credits, as the name suggests, is a scheme which focuses on the reduction of greenhouse gases in the environment and ensures that access concentration of greenhouse gases in the atmosphere is avoided.A carbon credit is an instrument or permit which allows the owner of the credit to emit stipulated units of Carbon Dioxide or other gases in the atmosphere. The Carbon Credit Scheme is a participle of “cap – and – trade” program which allows the polluting agencies to continue polluting up to a certain limit. This scheme has two-fold incentives for private companies which are:

    • In case the companies exceed their limit of pollution or carbon credits, they must spend an additional amount to purchase more credits.
    • In case the companies try lowering their carbon emissions, they can earn profit by selling their excess allowances.

Carbon Credit Certification and Decarbonization of The Mobility Sector

The mobility sector, which comprises of various activities such as transportation, logistics industry, vehicular travels etc., is one of the major contributors to emission of greenhouse gases. Therefore, the carbon credit scheme can enable the mobility sector in its efforts to decarbonize in multiple ways.

Firstly, carbon credit certifications which may be taken by the mobility companies would provide them with the financial incentive to cut down on their greenhouse gas emissions along with maintaining them within their stipulated limits. Secondly, the surplus carbon credits can be sold to other enterprises, thereby generating an inflow of funds that can be used for further research, development, and investments.

Adopting carbon credits may also lead to improvement of the brand image and goodwill of those companies who adopt this scheme which would further increase the revenue for the companies and attract environmentally conscious investors. Furthermore, adopting the carbon credit scheme would also enable the companies to track their progress towards decarbonization and contribute their share towards decarbonization of the entire mobility sector and achieving the goals of sustainable development.

Challenges for Mobility Companies

Even though carbon trading schemes and carbon credit mechanisms are well suited for mobility sector, they cannot be said to be free from challenges. For instance, there are numerous organizations providing carbon credit certifications, but it is necessary to choose the most credible and well-suited system of carbon credit to evaluate the progress in efforts to decarbonize. Secondly, the prices of carbon credits are highly volatile and keep fluctuating due to changes in the market forces of demand and supply, thus leading to difficulties for companies in estimating their budgets pertaining to carbon trading.

The scope of carbon trading is not very expansive but is limited to adjusting emissions instead of reducing them directly. Moreover, the process of decarbonization may not be easily achieved in the short run as it requires a considerable amount of expertise, investments and strategies which may not be feasible or affordable for small scale companies, thereby creating a non – level playing field.

Even though carbon credit certification is a major breakthrough for the automobile and mobility sector which would provide them with financial and market incentives for enhancing brand reputation and decarbonizing their operations, there are some challenges that can be managed by the companies in order to develop their business and contribute towards building clean and decarbonized operations, as recently adopted by Blu – Smart Cabs.

Author: Pooja Chatterjee

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