Introduction to Carbon Credits

What are carbon credits and why are they so important?

The Big Picture — We need carbon removal to limit global warming to 1.5°C

The 2015 Paris Agreement committed the world to limiting global warming to 2°C, or if possible, 1.5°C above pre-industrial levels. Although still damaging, at 1.5C the worst effects of climate change would still be avoided.

To achieve this, greenhouse gas emissions need to fall. The IPCC stated in its 2021 report that “it is unequivocal” that the current climate crisis is a direct consequence of human activity.

The release of greenhouse gases like carbon dioxide, methane, and nitrous oxide has created a ‘Greenhouse Effect’ where we’ve created a thicker atmosphere, trapping more heat from the sun and thus warming the planet, with terrifying effects.

Human activity has increased CO2 levels by 50%, rising from 267 parts per million (ppm) in pre-industrial times to 417 ppm in the present day. As a consequence we’ve seen a global temperature rise of 1°C, a 20cm sea level rise caused by melting ice caps, and growing ocean acidification and ecological destruction.

And yet, fossil fuels continue to be burnt at unprecedented rates.

In response to our failure to slow carbon emissions, the latest IPCC report stated that “the deployment of carbon dioxide removals to counterbalance hard-to-abate residual emissions is unavoidable if net zero…emissions are to be achieved.”

Removing greenhouse gases, whether through carbon capture, forestry, soil sequestration, or other methods, is vital. In a world ruled by shareholders and economics, carbon markets allow us to put a price on carbon and make polluters pay. Ethical arguments often go ignored, but financial imperatives are a powerful vehicle for change.

This makes our mission all the more important. We have to make the carbon credits market more viable, transparent, and effective, in order to reduce emissions and avoid catastrophic climate change.

What are carbon credits? 1 carbon credit = 1 tonne of carbon dioxide taken from the atmosphere.

A carbon credit is a measurable and verifiable emissions reduction from a certified climate action project, created via the removal or avoidance of one tonne of emitted carbon dioxide and other greenhouse gas. They’re often used to compensate for emissions caused elsewhere.

Each carbon removal project must pass a vigorous verification process to earn certification by a third party verifier like Verra or Gold Standard. Between them, these two leading standards boast over 2,700 projects in over 80 countries.

Who buys carbon credits?

Companies of all sizes are facing challenges when it comes to reaching their net zero and carbon neutral targets. Being 100% carbon neutral in the first place is not realistic for most of the people and companies. Therefore, the solution for most of us is to be as carbon neutral as possible and then offset the remaining footprint with carbon credits.

Below some of the companies that are buying carbon credits to compensate their carbon footprints:

• Alphabet (Google)

• Microsoft

• Stripe

• Disney

• Nike

• Salesforce

• Doordash

Through the carbon credit markets, funds are starting to flow from private capital into climate-action initiatives that would not have gotten off the ground otherwise. Whilst these initiatives are helping fund innovation in climate technology and supporting emission reduction projects on the ground, the current system is far from perfect. With the demand for carbon credits expected to grow rapidly, and indeed it must if we are to meet the Paris Agreement of limiting climate change to 1.5% by 2030, the carbon market must prepare for hyper growth.