What are Carbon Credits?
For business leaders, governments, and organizations that support green strategies, carbon offsets are a popular way to reduce climate-related damages caused by harmful greenhouse gas (GHG) emissions in the atmosphere. Carbon footprint offset is defined as third-party verified GHG emission reduction, removal, or avoidance equivalent to one metric ton of carbon dioxide equivalent (CO2e).
Carbon credits are tradeable certifications of GHG emission reductions. There are voluntary and mandatory carbon credit markets, and individuals and companies can each buy carbon credits to offset their carbon footprint.
Carbon Credits and Offsets
Often used interchangeably, the two terms refer to a market-based tool that allows businesses to do things like offset GHG emissions from a particular activity, such as private or commercial flights. Companies purchase carbon offsets that either prevent or remove GHGs in an equivalent amount to the activity they’re undertaking. Common carbon offset projects include:
Tree planting and carbon sequestration that facilitate GHG emissions removal. Forest conservation and renewable energy projects that further GHG emissions prevention. Some detractors say carbon credits are merely “permission to pollute.” Supporters say, while they are not the ultimate tool to address climate change, they serve an important role as businesses and industries further their emission reduction projects that directly address issues like transportation and supply chain emissions.
The Most Effective Carbon Offset Projects
There’s no single way to determine if one carbon credit initiative is more effective than another. The size of the project, how much carbon sequestration is realized, and where a project is located all play a role in measuring impact and success. Certain characteristics might make some projects more effective than others. For instance, some argue forest conservation projects are much more effective than tree planting ones.
A nice illustration of a major world organization using carbon credits to offset its climate footprint is the 2014 FIFA World Cup in Brazil. In 2013, the organization announced it would offset the estimated 2.7 million metric tons of CO2e generated primarily by international and local travel through a comprehensive sustainability strategy that included things like “green” stadiums, community support, waste management, and renewable energy developments.
As a result of FIFA’s voluntary offset initiatives in 2014, green building certification was made mandatory for the 2018 Russian stadium and 2022 Qatar structure.
Why Invest in Carbon Credits
Businesses and individuals choose to offset for many reasons, including to:
- Manage their carbon impact cost-effectively.
- Set an internal carbon price for their business.
- Fulfill supplier sustainability requirements requested by customers.
- Better manage climate-risks and reduce emissions.
- Get ahead in their industry and differentiate themselves as sustainable brands.
For organizations looking to combat climate change, carbon credits offer a quick way to take action on GHGs. As part of a broader, integrated carbon management strategy, they also signal to environmentally aware consumers the company reflects their personal values and beliefs.
How to Buy and Sell Carbon Credits
The best way to jump into the carbon offsetting game is by learning how offsets or credits can fit into an organization’s sustainability goals.
Carbon credits are bought and sold through various international brokers, trading platforms, and online retailers. Projects and organizations offering certified emissions reductions (CERs) must have them verified and validated by third-party organizations. It’s a rigorous process that aims to ensure real, measurable, and verifiable additional emission reductions are realized over and above what would have occurred without adopting CERs measures. Known as “additionality,” this concept ensures the carbon offsets generated do, in fact, represent the emissions reductions or removals that are being claimed.
Today, most carbon offsets are purchased voluntarily. Mandatory carbon markets, aka compliance markets, are separate from these voluntary programs. They’re created and regulated by mandatory international, regional, and subnational carbon reduction schemes. Unlike a carbon tax, emissions trading is an environmental management approach that leaves it to the market, not regulators, to determine the price of GHG emissions. The best-known emissions trading schemes include the California Carbon Market, the Clean Development Mechanism (CDM) regulated by the Kyoto Protocol, and the European Union’s Emissions Trading Scheme (EU-ETS), which is covered in this short video.
UBQ Materials is committed to being a leader in carbon positivity. While the impact of investing in carbon credits is still sometimes debated, these investment instruments can play an essential role in bridging the transition to net-zero emissions. For example, for every ton of UBQ material used, up to 12 tons of CO2e is saved. Businesses that commit to using UBQ material in their industrial applications are taking a crucial step on the road to creating climate-friendly products that reduce their carbon footprint.