The Role of Carbon Credits
What are Carbon Credits?
Carbon credits are permits allowing the owner to release a certain amount of carbon or other greenhouse gases. Purchasing one carbon credit allows a business to generate one ton of carbon emissions.
Why are Carbon Credits important?
One of the first questions asked after hearing about carbon credits is why are they important? After all, aren’t they just “pieces of paper?”
To answer this question, we first need to investigate how carbon credits are created.
How Carbon Credits are made
Across the globe are numerous projects that have been certified as reducing carbon emissions. Each project had to endure a rigorous review by one of the prominent global certification entities. Some of these entities we work with are as follows:
- Verra Registry: https://registry.verra.org/
- American Carbon Registry: https://americancarbonregistry.org/
- The Climate Registry: https://theclimateregistry.org/
- Gold Standard: https://www.goldstandard.org/
Once certified, each qualified project is given the right to claim a certain number of tons of carbon emissions that they will offset. At this point, each project has a decision – do they hold onto these rights or choose to sell them.
Many, if not most, make the choice to sell these rights into the global market to bring greater value to their original project. This is how a carbon credit is created and becomes available for purchase.
So in conclusion, is a carbon credit simply a sheet of paper? In one sense, yes, it is. But in another sense, carbon credits are so much more.
Carbon credits – more than just “pieces of paper”
Those sheets of paper signify a good investment for your business. First, carbon credits involve massive financial investment by a development firm to come up with carbon reducing projects.
Then, they require an enormous investment of time to review these projects by a certification entity. The certification entity determines whether the project meets strict guidelines for reducing carbon emissions and assigns value to the project based on how much carbon it reduces or “offsets.”
Next, the trading community makes a huge investment in time to research and market the value of these carbon reductions or offsets. Finally, these reductions are made available for purchase to a business owner as carbon credits.
Carbon credits offset or reduce the amount of carbon emissions your business produces. By purchasing carbon credits, these “pieces of paper” can help your business achieve carbon neutrality, and that’s a good investment.
Keep following us here as we continue to explore the world of carbon credits and the role they play in reaching carbon neutrality. Contact your Westlark Advisors team for expert advice about carbon credits and the role they play in the changing energy market.
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The Role of Carbon Credits
By JD Buss
Photo by Austin Chan on Unsplash