Climate change is one of the most pressing challenges in recent years, driven primarily by greenhouse gas (GHG) emissions from human activities, including domestic burning, an issue we are particularly mindful of as a business. In our range of news articles, we have extensively discussed climate change and emissions, with a strong focus on wood burning and the importance of adopting greener, more sustainable ways to stay warm.
To mitigate climate change, countries and businesses around the world have implemented various strategies, including the use of carbon credits. Carbon credits serve as a market-based mechanism to reduce emissions and promote sustainability. In this article, we look at the concept of carbon credits, their role in helping climate change, and their effectiveness in achieving climate goals.
Growing Urgency:
Action on climate change is becoming more urgent. According to the UN, global efforts to tackle climate change are still way off track. Data shows gases contributing to global warming are accumulating faster now than at any other time in human history. Greenhouse gases have increased by over 11% in the last two decades.
To reach Net Zero by 2050, it’s estimated that we need to reduce emissions by around 43%. However, when actual real-world plans are added up, emissions will likely be reduced by just 2.6% by 2030 compared to 2019.
What Are Carbon Credits?
Carbon credits are tradable certificates representing the reduction or removal of one metric ton of carbon dioxide (CO2) or its equivalent in other greenhouse gases. These credits are part of cap-and-trade systems or voluntary markets that aim to incentivise emission reductions. Organisations and countries can buy or sell carbon credits to offset their emissions.
How Do They Work?
Carbon credits work within two key systems:
Compliance Markets: These are regulated by governments and international bodies. Companies must adhere to emission caps and can trade carbon credits to remain within limits. Examples include the European Union Emissions Trading System (EU ETS) and also California’s Cap-and-Trade Program.
Voluntary Markets: Businesses and individuals purchase carbon credits to offset their emissions voluntarily. Projects generating these credits include reforestation, renewable energy, and methane capture initiatives.
Carbon Credits Advantages:
Encouraging Emission Reductions: Carbon credits provide financial incentives for businesses to lower their carbon footprint by investing in clean energy and sustainable practices.
Supporting Green Projects: Revenue from carbon credit sales funds climate-friendly initiatives like afforestation, wetland restoration, and energy-efficient technologies.
Promoting Corporate Responsibility: Many organisations use carbon credits to demonstrate their commitment to sustainability and improve their environmental, social, and governance (ESG) performance.
Facilitating Global Cooperation: Carbon credit markets enable developed countries to support emission reduction efforts in developing nations, fostering international climate action.
Carbon Credit Issues:
Risk of Greenwashing: Some companies may rely on purchasing credits rather than actively reducing their emissions.
Lack of Standardisation: Varying methodologies for credit verification can lead to inconsistencies in quality and credibility.
Market Volatility: Fluctuations in carbon credit prices can create financial uncertainty for businesses and investors.
Additionality Concerns: Ensuring that credited projects result in genuine and additional emission reductions remains a critical issue.
As climate policies evolve, carbon credit markets are expected to expand further. Advances in technology, such as blockchain and AI, may improve transparency and tracking of carbon credit transactions. Also, stronger regulatory frameworks and international agreements can enhance the credibility and effectiveness of carbon credits in fighting climate change.
Carbon credits are a valuable tool in the battle against climate change, encouraging emission reductions and funding sustainability projects. However, their success really depends on strict regulations, credible verification, and, of course, genuine corporate commitment to reducing emissions.
