What are carbon credits?
Summary
Carbon credits are certificates representing one ton of CO2 avoided or offset by a sustainable project. They allow businesses or individuals to compensate for their emissions by funding environmental initiatives such as reforestation or renewable energy. This mechanism helps reduce the impact of greenhouse gas emissions on the climate.
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Definition of carbon credits
A carbon credit is a certificate representing a reduction of one ton of CO2 or its equivalent in greenhouse gases, achieved through a sustainable project. These credits are generated by initiatives aimed at offsetting CO2 emissions, such as the development of renewable energy and reforestation.
Unlike carbon allowances, which impose an emissions cap on companies through regulations under a “cap-and-trade” system, carbon credits are voluntarily purchased to offset excess emissions. Each credit corresponds to one ton of CO2 avoided or sequestered. The carbon credit system plays a vital role in combating climate change by offering organizations a complementary solution to limit their carbon footprint.
Origin of carbon credits
Carbon credits were introduced under the Kyoto Protocol (1997) to encourage the reduction of greenhouse gas (GHG) emissions. This mechanism helps finance projects across various sectors, such as reforestation, renewable energy, and waste management, which contribute to offsetting CO2 emissions.
Carbon credits are traded on both voluntary and regulated markets. Regulated markets impose emissions caps on companies, while voluntary markets allow businesses and individuals to purchase credits to offset their emissions and support sustainable projects.
How do carbon credits work?
Carbon credits are generated by certified projects that reduce or capture CO2 emissions. These projects are verified by independent organizations to ensure their real impact on emission reductions.
The compensation mechanism allows businesses or individuals to purchase credits to offset their own greenhouse gas emissions. Each credit represents one ton of CO2 avoided or absorbed.
Organizations such as Gold Standard and Verified Carbon Standard (VCS) certify these projects, guaranteeing the quality and transparency of carbon credits traded on the markets.
Use of carbon credits
Companies use carbon credits to offset their excess emissions and achieve their carbon neutrality goals. They can invest in certified projects that reduce global emissions.
Individuals can also offset their personal carbon footprint by purchasing credits through specialized platforms, balancing emissions from travel, energy consumption, or purchases.
Different sectors, such as aviation, heavy industry, and energy, use carbon credits for compensation, especially those that cannot completely eliminate their CO2 emissions. Carbon credits allow these sectors to offset their greenhouse gas emissions.
Advantages of carbon credits
Carbon credits offer several major advantages in the fight against climate change:
Direct contribution to reducing global GHG emissions: They help fund projects that reduce or capture greenhouse gases.
Encourages sustainable projects in developing countries: Carbon credits support environmental initiatives like reforestation and renewable energy, often in vulnerable regions.
Flexibility for businesses and individuals: They provide a practical solution to offset unavoidable emissions while committing to more responsible environmental practices.
Disadvantages of carbon credits
Despite their benefits, carbon credits also have certain limitations:
Risk of "greenwashing": Some companies may focus on offsetting without actually reducing their own emissions, giving a false impression of environmental efforts.
Difficulty verifying the concrete impact: It can sometimes be challenging to guarantee that the projects funded by carbon credits have a real and lasting effect on emission reductions.
Complexity of monitoring and certification: The certification process for projects can be complex and costly, leading to delays or uncertainties regarding the validity of the credits.
