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Carbon Credits 101

For more than a decade, the world has met its climate commitments primarily by offsetting CO₂ and other greenhouse gas emissions by purchasing “credits” from projects that avoid or reduce emissions. The money the project makes from selling credits is used to pay for the cost of implementing and maintaining the project over time.

Carbon credits (also known as “carbon offsets”) can be acquired in a variety of ways to commercial and individual customers who want to lower their carbon footprint. Basically, one is buying a permit to emit one tonne of CO₂ by investing money into a project that has removed that one tonne of CO₂.

Image Source: Gold Standard

Types of Credit

There are two main types of carbon credits available today: Voluntary Emissions Reduction (VER) and Certified Emissions Reduction (CER). CERs are issued by the Clean Development Mechanism, an offset program run by the United Nations and verified under rules of the Kyoto Protocol. CERs are typically used by companies and governments that are legally required to offset their emissions in order to comply with a regulatory program. These types of projects might involve a rural cookstove project aiming at reducing wood and charcoal use or the installation of a hydroelectric power plant to generate renewable energy.

A carbon credit is considered a VER or “voluntary” credit when it is purchased voluntarily rather than as part of a compliance process. VER credits are available to everyone interested in neutralizing their carbon footprint motivated mainly through corporate social responsibility initiatives and public relations. As in the regulated market, all VERs must be verified by an independent third party. Examples of these credits are investing in Direct Air Carbon Capture and Storage or Reforestation.

Cost

Credits can vary in price per tonne of CO₂ equivalent. The price is typically reflective of the validity and sophistication of the carbon offset project. High-quality carbon projects must adhere to a rigorous set of standards to be considered effective and viable offsetting practices.. The cost ensures that the project fully accounts for its development in terms of safe operations, true offsetting measures, and basic human rights. The world’s need for carbon neutrality has driven competition among carbon offsetting projects that may try to compete on price. But considering the long-term environmental and social impacts of the project are just as important as the objective of the credits themselves. Gold Standard, one of the governing bodies of carbon credits, provides great insight on why prices vary by project that you can read here.

Become ‘Carbon Negative’

If you can calculate how much CO₂ you produce, you could essentially purchase credits towards your emissions and eliminate your footprint. In theory, if you reduce your footprint and offset what you can’t avoid, businesses and individuals alike could offset even more and become “carbon negative”. This is the means of not only eliminating what you emit but eliminating MORE than you emit. While the world will need to reach “net zero”, those of us who can afford to move faster and go further should do so. Read more here:

Negative Carbon