What are Carbon Credits?

What are Carbon Credits?

A carbon credit (also called a carbon offset) is a certificate that shows a contribution made to have a certain amount of CO2 removed from the atmosphere. Credits are usually measured in metric tonnes of CO2e (carbon dioxide equivalent).

While a carbon credit is not a tangible product, and is never a precise, direct measurement of real impacts to the planet, it is a representation that allows businesses, communities or countries to have transactions between their carbon producing activities and carbon reducing activities.

An entity which is avoiding carbon production, or actively doing something to reduce carbon in the atmosphere, can put a value on their activity. An entity which is adding carbon can purchase the ‘credit’ for reductions, at the value set by the market or the seller. In this way, they have made a contribution which serves as a counterbalance against their total impact, while they continue their activity.

How are Carbon Credits used?

Governments, industries or private individuals who want to reduce the total impact of their activities can buy carbon credits to “offset” the carbon they generate. Buying a credit does not change one’s own emissions–but it contributes to activities that will achieve reductions or reversal of damages elsewhere. This matters because the atmosphere is shared around the world. No matter where carbon is emitted, it affects the environment everywhere. With measured, valued credits, those who can contribute to reducing carbon will have a financial method of getting support to continue reducing or minimizing carbon in the atmosphere.

Where do Carbon Credits come from?

A carbon credit is “created” when:

  • an emission-reduction activity is undertaken, e.g. a reforestation project
  • the activity is carried out in a controlled way (a “methodology”), so that the carbon-reducing impacts can be measured
  • the activity and the measurements are audited by an organisation authorised to confirm the activities and the reductions

Afforestation and reforestation activities are examples of an excellent and easily measurable way to remove emissions from the atmosphere and create carbon credits.

Click here to visit the UNFCCC page on Carbon Credits

However, these are not the only ways. Credits can be derived from:

  • Building new infrastructure to generate renewable energy, like wind turbines. There is a footprint associated with constructing it, but there is a greater future reduction in impacts if this energy replaces the use of non-renewables like petrol
  • Changing the processes or materials used in a manufacturing activity, so that less is wasted, or more local sources used (reducing the secondary impacts of transport), or more renewable sources are used
  • Protecting intact parts of the world’s environment from being damaged for development or as a result of resource exploration. It takes decades or even centuries for some ecosystems to develop their balanced and diverse relationships between resources and life forms; the global benefit of preserving untouched areas is very high when compared to the benefit of efforts to restore them after the damage is done.