We all have a way of life, and while some of us can afford to put solar panels on our houses, there are still emissions produced from everything we do every day, from the production of the clothes you wear, to the furniture you sit on, and from the food you eat, to the services you consume. Besides, we don’t all want to drive a hybrid car and become vegetarians. So what can we do?

What is Carbon Trading?

Carbon trading, or carbon offsetting, is a way to balance or compensate for carbon emissions in one geographical place, with a reduction in emissions in another. Since it doesn’t matter where Greenhouse Gases (GHG) are emitted, as their effect on climate change is global, reducing emissions in Brazil or Italy is as effective as doing so locally. ‘Carbon emissions’ refers to carbon dioxide (CO²), and are a form of GHG, as is methane and nitrous oxide, but for most of us it is easier to think in terms of carbon emissions.

It’s completely voluntary, but in 2011 it will become compulsory for some industries. While we do need to reduce our personal carbon emissions and stop being wasteful, some emissions are currently unavoidable, so carbon offsetting is the way to compensate for those emissions we cannot stop.

Little things, when done by millions of people, can make a big difference, and carbon offsetting reduces emissions with a minimum of effort and cost. Offsetting means paying someone else to reduce CO² in the atmosphere on your behalf. In that way we pay for the damage we are causing and the money stimulates the development of green technologies that we desperately.

What is a Carbon Credit?

Carbon reduction projects throughout the world create a tradable ‘carbon credit’ for every tonne of carbon dioxide equivalent (CO²-e) that is stopped from entering our atmosphere. When you buy a credit, it is then ‘retired’ so it can’t be sold again – the credit will be recorded against your name, meaning that you have stopped one tonne of CO²-e that otherwise would have entered the atmosphere.

There are many different kinds of carbon credits. Certified carbon credits are created by government approved abatement projects. These include projects such as harnessing landfill gas, reforestation and sequestration, and electricity consumption reduction.

Beware: because there are plenty of people claiming to produce carbon credits, but they are in fact not accredited, nor are they even measured properly. You might be paying someone for nothing.

And how much does it cost? Generally, a carbon credit is $20, though this will probably rise. The Government will be setting a cap on its carbon credits at $40. So, currently, if an average Australian household emitting 20 tonnes of CO² wants to go ‘carbon neutral’, it would cost $400 per annum. The equivalent would be to plant about 80 trees.

What is a Footprint?

A carbon footprint is a measure of the impact that our activities have on the environment, and in particular, greenhouse gas emissions and climate change. It relates to the amount of greenhouse gases produced in our day-to-day activities through burning fossil fuels for electricity, heating and transportation, etc.

An alternative definition of the carbon footprint is the total amount of carbon dioxide attributable to the actions of an individual or an entity (which includes emissions through their own energy use, but also from unforeseen emissions as well) over a period of one year.

So the aim is to work out your footprint, reduce your footprint, and then offset the remaining emissions. It’s much cheaper than buying solar panels, which still won’t eliminate your emissions, though it helps.

What does Carbon Neutral mean?

Being ‘carbon neutral’ means that you have calculated your carbon footprint, and then eliminated the Greenhouse Gas you produce by purchasing carbon credits to offset your emissions.

But being ‘carbon neutral’ takes a little more responsibility than just offsetting. To become carbon neutral, especially for businesses, you need to reduce your carbon footprint first, and commit to continue reducing your emissions.

Beware of businesses claiming to be carbon neutral. Check their accreditation, where they get their carbon credits from, and whether they truly are ‘green’.

The landmark Kyoto Protocol is so famous that it is often misunderstood as a stand-alone agreement. Instead, it is what the name says: a protocol, in this case of the 1992 United Nations Framework Convention on climate change. The treaty’s purpose is to regulate man-made greenhouse gas emissions with the goal of stabilizing global climate change.

Negotiations on the treaty were concluded in December 1997, with most of the signatories joining the treaty regime by March 1999. However, the treaty did not come into force until February 2005 with the ascension of Russia to the Kyoto regime. The United States also signed the treaty, doing so in 1998, but neither President Clinton nor President Bush submitted the treaty to the senate for ratification. Without that ratification, the American signature on the Kyoto Protocol is effectively worthless. This was compounded when the Bush administration abruptly and provocatively withdrew from Kyoto negotiations in April 2001. Currently, the United States remains the sole unratified signatory. Non-signatories include Afghanistan, Andorra, Brunei, Chad, Iraq, the Palestinian National Authority, San Marino, Taiwan and Zimbabwe.

The Kyoto Protocol binds a set of countries listed in Annex I to specific reductions in greenhouse gas emissions. Annex I states are essentially the same as Western industrialized countries. The other signatories of the Kyoto Protocol have agreed to a more general principal of greenhouse gas emissions. Therefore China, who stands as the single largest polluter on Earth, is not bound to meet any specific reduction target by Kyoto.

The other key provision of the Kyoto Protocol is the cap and trade system. Annex I countries have a carbon emissions “cap,” or maximum limit imposed upon them. This requires them to reduce their emissions by an average of 5.2% of their 1990 emissions level by a target date between 2008 and 2012. However, there is a “trading” escape valve, where states or companies can buy “emissions credits” to make up the difference between actual performance and their established “cap.” The European Union actually created its own Emissions Trading Scheme in 2003 to serve as a market for emissions allowances.

Despite the lack of national participation, several U.S. states have formed an organization that operates under Kyoto-like terms, including a cap and trade emissions system. This is called the Regional Greenhouse Gas Initiative and consists of Maine, New Hampshire, Vermont, Connecticut, New York, New Jersey, Delaware, Massachusetts, and Maryland. While not joining the group, California governor Arnold Schwarzenegger signed a law that calls for California to cut it’s emission to Kyoto-like levels. In addition, dozens of US cities have independent greenhouse gas emissions reductions programs.

Critics of the Kyoto Protocol focus on a cost-benefit analysis of the actions called for by the treaty, and note that the cuts called for by the Protocol will have only a small impact on global warming. They also note that by effectively leaving countries such as India and especially China out of the system it does not address major sources of emissions that are still growing. After all, while the United States is the world’s largest per capita emitter of carbon dioxide, its growth rate is effectively frozen or in marginal decline. China’s emissions are the largest in absolute terms and growing explosively.

However, the Kyoto Protocol was never intended to be the end-all, be-all treaty regarding carbon emissions and climate change. It was only ever intended to be the necessary first step to start the process. Any successor agreements would call for another round of emissions reductions, and it is doubtful that such a treaty would be ratified even by the parliaments of Kyoto-enthusiasts in Europe and Japan if it did not include at least an emissions freeze on countries like Brazil, China and India. However, the big missing link still remains the United States and without American participation, the Kyoto Protocol remains only partially workable.