Introduction to Carbon Credits

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What is the voluntary carbon market?

The Voluntary Carbon Market (VCM) is a market in which individuals, corporations and project developers purchase and sell carbon credits on a voluntary basis. These credits represent avoidance, removal, or reduction of greenhouse gasses in the atmosphere. The VCM allows entities to offset unavoidable emissions by purchasing credits that represent projects which remove or reduce greenhouse gasses in the atmosphere. The VCM is growing rapidly, reaching over 608 million tons of CO2e emissions reductions or removals by 2019, the equivalent of taking more than 131 million cars off the road. The VCM was formed with the aim of driving finance to activities that reduce greenhouse gas emissions, and has evolved into a robust and effective means to tackle climate change by driving resources to projects which deliver independently verified and additional emissions reductions on a global scale.

What is a carbon credit?

A carbon credit is a tradable unit that represents one ton of CO2 equivalent greenhouse gas emissions. When an entity claims the environmental benefit of removing, reducing, or avoiding a ton of CO2 equivalent GHG, the credit is retired on the registry that issued the credit and will no longer be tradable. Each credit is issued from a specific project and certified by carbon standards.

How do carbon credits get created?

Carbon credits are generated from projects around the world that pull greenhouse gasses out of the atmosphere or keep emissions from being released. Each time an issuing registry verifies that a project has reduced, avoided, or destroyed one metric tonne of GHG, one carbon credit is created.

What is a carbon credit project?

A carbon credit project is an environmental project, or a set of deliberate activities, that reduces emissions in some way. In order to issue carbon credits, a project must prove it will reduce emissions. These projects must submit to rigorous auditing by regulatory bodies to ensure they are doing everything they claim.

What are the most common project types?

The most common project types include forestry and conservation, renewable energy, community projects, and waste/landfill management.

  • Forestry and conservation: These projects revolve around the ability to capture carbon by way of planting new trees or ensuring carbon is not released by protecting existing trees.
  • Renewable energy: These projects help to build or maintain renewable energy sites, including solar, wind, or hydro, in order to decrease reliance on fossil fuels and grow the amount of renewable energy.
  • Community projects: These projects center on underdeveloped communities around the world, introducing energy-efficient methods or technologies in places where they may not already exist. Such projects are aimed at simultaneously making underdeveloped areas more sustainable and lifting communities out of poverty. ‍
  • Waste/landfill management: These projects are aimed at capturing methane involved in waste and converting it into electricity.

How does my buying a carbon credit support climate action?

Purchasing a carbon credit enables individuals, corporations, and other entities to compensate for or neutralize emissions that have not yet been eliminated by financing projects that reduce emissions, avoid emissions, or remove greenhouse gasses from the atmosphere. A robust and large VCM increases the flow of capital to these projects, playing a critical role in reaching international net-zero goals.