What are carbon credits?

 

Source: southafricatoday.net

What are carbon Credits?

After the Paris Agreement, which came into effect in 2015, as per the carbon emissions reduction plan, corporate companies with high uncontrollable emissions are being set off by buying the carbon credits available in the carbon markets.

The carbon credits are allowances similar to passes that allow big polluting industries to offset a 1-ton of CO2 equivalent emissions. The carbon credits can help the government and companies with extra credits along with additional revenue flows and help the big-polluting companies look cleaner. 

Simply put, carbon credits are used by corporate companies and investors to show governments that they are helping reduce carbon emissions as per the local government policies.

How to offset the carbon emissions?

The carbon offset project can be grouped into two categories: avoidance/reduction, renewable energy production, and methane capture. In the removal/ sequestration projects, reforestation and direct carbon capture are used.

The United Nations

The United Nations allows countries to issue a specific number of credits where the nations are responsible for issuing, monitoring and reporting their carbon credits annually, with a set amount of GHG before purchasing credits.  

The Sellers

Companies, governments, and individuals registered in carbon credit programs can sell extra carbon credits. For example, a landowner with reforestation, aforestation or carbon removal initiatives can use the funds to pay for their operations.

The Buyers

As I stated earlier, big companies with high polluters, individuals, or governments can use these carbon credits through the carbon markets with an overview of a government organization.

The Price

As per Bloomberg, the metric ton of carbon credit worth around 42 USD per tonne in California and 76 USD per tonne in Europe in 2024.

Do these carbon offsets reduce emissions?

These carbon offsets help to reduce the carbon emissions on paper for the company, to have a good reputation in the public, and to reduce the carbon taxes from the governments. In reality, the company continues to emit carbon, over which it has no control. This carbon credits system helps show the company becoming NetZero by its target set date.