Carbon Credits: A Pathway to Net Zero
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How carbon credits drive corporate sustainability
Ever wondered how can carbon credits can complement your climate action journey? We take a look at what they are, the impactful projects they support, and how to maximize their use to accelerate your organization’s decarbonization. Developing a corporate sustainability strategy involves reducing emissions across your value chain and switching to renewable energy, among other environmentally sound measures. But what about unavoidable emissions? What do you do if you want to take additional climate action? Carbon credits present an additional, complementary opportunity to support your emission reductions goals. Purchasing carbon credits is a viable, financially efficient step to address emissions you can’t avoid. It’s even a complementary action in achieving carbon negativity, in more ambitious cases. Here, we’ll explain how carbon credits work and how to get the most out of them.
Carbon credits represent greenhouse gas reduction, avoidance, and removal
When you purchase a carbon credit, you receive a transferable certificate that represents the avoidance, reduction, or removal of one metric ton of carbon dioxide (CO2) or an equivalent greenhouse gas (GHG) from the atmosphere. Carbon credits are defined in terms of the amount of tons of CO2 equivalent (tCO2e) they offset.
While there are many different types of carbon credits, they fall into one or both of these two markets:
· Credits can be purchased through the voluntary market as part of a climate action plan. Carbon standards issue credits for projects that reduce, avoid, or remove CO2 and other GHGs. Examples of these standards are the Gold Standard and VERRA’s Verified Carbon Standard.
· Credits can be purchased through the regulatory compliance market to uphold government mandates on emissions. Many companies must adhere to specific standards if they emit substantial GHGs.
What’s important to note is that to make bold sustainability claims linked to your purchase of carbon credits, it’s necessary to first mitigate and eliminate emissions within your own organization. Once you have reduced your emissions as much as possible on your end, you can purchase carbon credits to compensate (avoidance / reduction credits) or neutralize (carbon removal credits) these unavoidable emissions as you work to reduce your overall footprint.
How purchasing carbon credits supports decarbonization around the world
Carbon credits are generated by high-impact climate projects that offset, reduce, or remove CO2 and GHG emissions in a variety of practical and innovative ways. Projects that involve renewable energy, energy efficiency, waste management, and other related activities avoid or reduce emissions. Projects that involve afforestation, reforestation, biochar, land use, soil carbon sequestration, and more remove and sequester GHG emissions.
In addition to reducing emissions, these projects support the advancement of the UN sustainable development goals (SDGs) by growing local economies, boosting infrastructure development, providing food security, enhancing healthcare access and quality, and advancing gender equality in developing regions.
For instance, a forestry project may involve local landowners and farmers in the tree planting process, bringing additional income streams into rural communities. A well improvement project may reduce the amount of timber needed for decontaminating water via heat, as well as mitigating health issues related to smoke from woodfires.
Carbon standards
When you purchase carbon credits on top of your internal emissions reduction activities, you get closer to being able to make impact claims like net zero. To back these claims, projects that generate carbon credits must go through third-party auditing and verification.
These projects must be approved by internationally recognized standards such as Gold Standard and Verified Carbon Standard, run by VERRA. Projects that generate credits must:
Be real.
Be additional, meaning the project’s impact would not have occurred in its absence.
Be permanent. GHG reductions achieved by the project must not be temporary or reversible.
Be based on realistic and credible baselines.
Avoid double counting emission reductions or removals.
Account for leakage. This refers to a net change of GHG emissions or removals that are related to the mitigation activity but occur outside its boundary.
How the price of carbon credits is determined
Project attributes like location, vintage, environmental and social benefits, scale, and technologies used in projects all affect the price of carbon credits. Projects tend to generate more expensive carbon credits when they…
Are located in a country with few other projects.
Are more recent.
Support more environmental and social benefits.
Are executed on a smaller scale.
Involve expensive technologies. A reforestation project will likely generate costlier credits than a renewable energy project.
Purchase carbon credits to get closer to your environmental goals
Purchasing carbon credits drives financing toward sustainable initiatives, and overall contributes to impactful corporate climate action. These contributions expand every day as companies around the world commit to reducing and offsetting their emissions.
By engaging in carbon credit purchases, businesses can reduce their cost of climate inaction while generating positive economic and environmental impacts. Whether through agriculture, solar, or maritime projects, carbon credits present a pathway to sustainable success.
If you want to purchase carbon credits to make progress on your voluntary sustainability goals, you have a wide variety of options. At ACT Group, we can help you identify projects that align with your brand, business, and climate action targets.
To learn more about how your business can get started with carbon credits, contact us today.