Carbon Credits Still Being Used
Carbon credits are tradable permits that limit the amount of greenhouse gas emissions a business can produce over time. They’re typically issued in the context of regulated programs called cap-and-trade, where regulators set an overall limit on carbon emissions — think of it as a carbon pollution allowance — and businesses that want to exceed their allowance can purchase credits from companies who have reduced their emissions below their allowance. Cap-and-trade programs currently exist in some form in Canada, the EU, Japan, Australia, China, New Zealand, South Korea and in many individual states and cities around the world.
In addition to being a valuable tool for helping to decarbonize the economy, these programs also serve as a valuable way to mitigate the impact of climate change on the most vulnerable communities. They allow the most polluting companies to offset their greenhouse gas emissions through investments in projects that reduce emissions elsewhere.
To buy carbon.credit, companies disclose their emissions and goals for reducing them over time. They then use that information to determine what projects they can implement to reduce their emissions. Then they can purchase credits to offset any emissions from sources they cannot eliminate entirely, and to cover their remaining emissions, they can invest in projects that will capture carbon dioxide from the atmosphere.
Are Carbon Credits Still Being Used?
One of the most common ways to reduce carbon dioxide emissions is through land use and reforestation projects. These projects utilize Mother Nature’s natural carbon sinks – the trees and soil that naturally absorb carbon from the air – to capture and store CO2 by planting, preserving and managing forests, land restoration, soil management and more. To be eligible to sell carbon credits, these projects must be certified by a third-party body like Verra, which provides a set of standards for quality assurance in the voluntary market.
The underlying goal of these projects is to capture and store carbon in the soil or water, but they often generate additional ‘co-benefits’ in the form of economic development, job creation, water and food security and more. However, when the market price of carbon credits falls below what it costs to operate and maintain these projects, they may become financially unsustainable, which can ultimately harm vulnerable communities.
A growing number of corporations are setting net-zero targets for their emissions and are looking to purchase carbon credits from projects that can meet those requirements. This has driven the growth of the voluntary carbon credit market, which is up by a factor of more than 20 in recent years.
To help streamline the complexities of this market, exchanges and verification bodies have created standard products for these credits. For example, Xpansiv CBL and ACX have both set up standard products for Nature-based Carbon Credits (N-CBs), where credits sold under those labels can be guaranteed to have certain characteristics, such as the type of project, a fairly recent vintage and a verified quality by a restricted group of organizations.
