Carbon Credits, also known as carbon offsets, are a crucial part of modern plans of action to stop global warming. Created as a product of the Kyoto Protocol – a landmark 1997 UN environmental agreement aiming to reduce the onset of global warming – the market for Carbon Credits was established in the interest of adding a mechanic that put pressure upon companies that produce large amounts of emissions, guiding them towards greener practices and production methods.
Simply put, paying for a Carbon Credit allows a government or company to emit a certain amount of greenhouse gasses like carbon dioxide, methane, nitrous oxide, hydrochlorofluorocarbons (HCFCs), hydrofluorocarbons (HFCs) and ozone. Each credit accounts for a metric ton of gas, and their price is measured using these terms as well.
But why must these parties pay for credits, and how does attaching money to the emission of greenhouse gasses help the environment?
On paper, buying a Credit is intended to ensure that with every metric ton of greenhouse gas paid for, the funding is provided to projects that remove a metric ton of greenhouse gas. The larger the company and the more greenhouse gasses it creates, the more budget it must dedicate to Carbon Credits, which therefore directly affects emitters of greenhouse cases while at the same time funneling much-needed support into projects that reduce emissions and promote sustainability.
This system and the buying and selling of Carbon Credits forms what is known as the Climate Market, which has been a booming sector since it was first conceptualized. Emitting companies can buy credits from other companies or governments that use less than their current stock of credits to offset their own emissions, have them issued by countries or environmental organizations, or earn them by spending money to fund projects that take positive environmental action and thus ‘negate’ the amount of gas expected to be emitted.
Examples of the biggest producers of Carbon Credits include the government of China, who has repetitively dominated credit production across multiple different climate credit systems. When it comes to buyers, however, cryptocurrency platforms, airlines, carmakers, and oil companies top the list, attempting to achieve ‘carbon neutrality’ by entirely balancing their emissions with their rate of carbon negation.
I think it's harder for people than it should be. But as more and more of us become carbon neutral and change the patterns in our lives to be part of the solution instead of part of the problem, we are now beginning to see the changes in policy that are needed.
- Al Gore
The Climate Market is still going strong in recent years, even with the introduction of the Paris Agreements and the changes it brought, which included superseding the original clauses that brought it into existence, though this made it no less relevant in today’s economy. In fact, the Climate Market’s futures are expected to skyrocket as the importance of climate consciousness increases, fossil fuels become more and more expensive, and the lucrative and sustainable natures of greenhouse gas negating businesses are fully realized.
However, while the Climate Credit system proved to be a quite effective step in developed regions such as Europe and North America, where large companies and are more easily restricted and curbed without directly damaging the economy of the country they reside in, it has shown to be less effective in developing countries, where the current affordable and available nature of fossil fuels and industry methods that involve emissions makes their use greatly favored if not necessitated due to these countries’ strong need for economic growth.
- Carbon Credits is a mechanic that put pressure upon companies to adopt greener practices and production methods.
- The buying and selling of Carbon Credits forms what is known as the Climate Market.
Additionally, the Climate Market is certainly not a stranger to corruption, with climate regulation organizations in countries such as Australia famously having been shown to falsely trade credits gained from fabricated sources, such as claiming credits for capturing gasses that were then used in generators or claiming credits for not cutting down trees that were never going to be cut down.
