Climate Change Climate Change Carbon Markets & Finance

Question 1

What is a carbon credit?

Accepted Answer

A certificate representing one metric ton of CO2 equivalent that has been reduced or removed from the atmosphere

Answer

A carbon credit represents one metric ton of CO2 equivalent reduced, avoided, or removed, and can be bought and sold to offset emissions.

Question 2

What is the difference between a compliance carbon market and a voluntary carbon market?

Accepted Answer

Compliance markets are required by regulation; voluntary markets allow organizations to offset emissions on their own initiative

Answer

Compliance markets operate under government-mandated cap-and-trade systems, while voluntary markets allow companies and individuals to purchase offsets without a legal requirement to do so.

Question 3

Under a cap-and-trade system, what happens when a company emits more than its allocated allowances?

Accepted Answer

It must purchase additional allowances from other companies or face penalties

Answer

Companies exceeding their emission caps must buy allowances from those with a surplus or pay heavy fines, creating a financial incentive to reduce emissions.

Question 4

What is the California Cap-and-Trade Program?

Accepted Answer

One of the largest carbon markets in North America, legally requiring major emitters to hold permits for each ton of CO2 they emit

Answer

California's Cap-and-Trade Program is a mandatory market-based system covering major greenhouse gas emitters, and it is one of the largest such programs in the Western Hemisphere.

Question 5

What does 'additionality' mean in the context of carbon offsets?

Accepted Answer

The requirement that emission reductions funded by offsets must be above and beyond what would have happened anyway

Answer

Additionality ensures that a carbon offset project generates real, verifiable emission reductions that would not have occurred without the carbon finance.

Climate Change Practice Test

Climate Change Practice Test

Climate Change Climate Change Carbon Markets & Finance