Everything You Should Know About Carbon Credits


Carbon credits are on everyone’s lips these days, although not everyone knows how they are used or how they are able to benefit the environment. Some people learn about these credits because they are required by law to utilize them in the commercial setting, while other people simply want to do their own part for the environment, and so they are interested in getting to know a bit more about them.

Cooling towereThe Voluntary And Regulatory Markets

When it comes to carbon credits, the field is divided into two; the voluntary and the regulatory markets, and while these are based on the same principles, they can be very different in nature. According to the Carbon Trade Exchange;

In the compliance market, carbon credits are generated by projects that operate under one of the United Nations Framework Convention on Climate Change (UNFCCC) approved mechanisms such as the Clean Development Mechanism (CDM). Credits generated under this mechanism are known as Certified Emissions Reductions (CERs).

The voluntary market involves those credits that are created according to independent international standards, like the VCS, or Verified Carbon Standard and they are called VERs, or Verified Emission Reductions.

Each credit refers to one ton of carbon dioxide equivalent and they basically represent a “right to emit”; in the simplest terms, this means for every credit a business has to spend, they are allowed to emit 1 ton of carbon dioxide. The aim is for them to reduce as much of their emissions as possible and this is one way of regulating the industry.

The Effect On The Planet

One of the main reasons for putting these credits in place is because the entire scheme is actually going towards reducing how much Green House Gas is being emitted into the atmosphere. In a wider scale, these credits are also contributing to the introduction of renewable energy systems in third world countries, among many other things. An entire field has been set up around the trading of these credits. As the experts of Carbon Strategy Group explain;

The opportunity to trade carbon credits was created by the United Nations’ Kyoto Protocol in 1997.

This field is not new, exactly, but there are still many people who do not know about it, so there is a lot of room for expansion when it comes to these credits.

Renewable energyThe Projects That Generate Carbon Credits

There are certain projects that actually help to generate the credits that can be sold on. Firstly, projects that involve a switch to renewable energy can lower the dependence on fossil fuels that are fast depleting. Secondly, the planting of trees that actually store CO2 can also work towards reducing the greenhouse gases being produced by commercial properties and residences, among other sources. Energy efficient practices and methane capture also contribute towards the establishment of these credits.

How Are These Credits Issued?

In order to get either VERs or CERs issued, individuals will need to make themselves aware of the processes that need to be followed to meet with the regulations outlined by the standardizing body. Since both options need to meet with specific requirements, people need to make sure they are aware of the types of credits they are looking to have issued. Only once this information has been obtained should individuals then submit their proposals to the relevant governing body, including a selection of the methodology that will be put in place, the design of the project, an auditor review and have a monitoring system put in place that will be audited at a later date.

Holding Credits

In order to store credits, the appropriate bodies place them in “registries”, and these are also used for the issuing and the transferring of these carbon credits. The credits are tracked with the use of a serial number that is attached to each one, and this remains until the credit has expired.

Investing In Carbon Credits

With the rise of these carbon credits, people have actually been given the opportunity to invest in them, and many have already jumped onto the bandwagon. Individuals shouldn’t think of this as a way to make some “easy money”, however. The experts at the FCA have this advice to give;

Trading on carbon credit markets requires skill and experience, and we strongly advise you to get independent professional advice before handing over any money.

When searching for opportunities to make these types of trades, you’ll find salespeople just about everywhere and you can take advantage via email, at exhibitions, through seminars or even through the post. Depending on where you live, these sales might take place overseas, so jumping on board means you need to make sure you are investing in a legitimate opportunity, since you could end up struggling to fight a case in which you were taken advantage of if you are based in another country.

Which Bodies Validate Carbon Credits

Before you make a purchase or trade with these credits, you need to be sure that they are validated by the appropriate organizations within the country in which you live. If you live in the UK, for example, you can turn to the following bodies for information about validated, high quality carbon credits; Verified Carbon Standard, Climate Action Registry, Gold Standard and Clean Development Mechanism.

Becoming Carbon Neutral

There are ways that companies can actually make themselves completely carbon neutral; they can do so through the purchase of carbon credits. When businesses are carbon neutral, they are actually offsetting zero carbon emissions into the atmosphere, because the amount that they do is negated by the effort that has been put into clearing it up, and this is why they choose to purchase the credits to begin with.

It doesn’t matter whether you are purchasing credits because you simply want to have a positive effect on the environment, whether you are looking to use these credits as a method of making money or whether you are forced to do so as a commercial enterprise, understanding the process makes it much easier to accomplish your goals.


No comments yet.

Leave a Reply

Current month ye@r day *