In light of the ever-worsening impacts of climate change, there has never been a more important need for effective climate action. Carbon offsetting credits are a critical part of the solution to addressing global warming. Through the mechanism of carbon offsetting, organizations and individuals can finance and speed up their efforts to lower greenhouse gas emissions. This article explores 10 reasons why carbon credits are essential for climate action and highlights the benefits, solutions, and global impacts of carbon credits.
1. Encouraging Emissions Reductions
Each carbon credit signifies that one metric tonne of carbon dioxide (or its equivalent of other greenhouse gases) has been verified as safely removed from the atmosphere over a specified period. A carbon credits market is an artificial construct to provide financing to projects that reduce emissions, whether by way of renewable energy installations, reforestation schemes, energy efficiency improvement, and so on. Carbon credits inject financial value to those interested in reducing their emissions, regardless of the size of the business.
2. Supporting Sustainable Development
Carbon credit projects can also help achieve wider sustainability development objectives. Few offset projects result in emissions reductions in isolation. Their inherent design almost always incorporates additional benefits apart from carbon sequestration or emissions reductions. The planting of a new tree — whether in a woodland restoration site or an agroforestry system in Africa — typically increases biodiversity and results in additional ecosystem services, such as enhanced soil quality and better flood control.
3. Facilitating Market-Based Solutions
Carbon credits form a cornerstone of market-based approaches as they effectively allow for flexible and cost-efficient emissions reductions by allowing businesses and governments to buy credits to meet their compliance targets. A broad and deep market lowers the costs to meet a set litre-per-gallon requirement; likewise, broad and deep markets for carbon credits reduce the cost of meeting a given emissions-reduction target. This, in turn, supports innovation in low-carbon technologies, as those that keep costs down will be most attractive to consumers. The cost of achieving emissions reductions is lowered, which, in turn, makes it easier for governments and businesses to meet their commitments.
4. Driving Technological Innovation
This demand for carbon credits further promotes investment in technologies that cut emissions by incentivizing innovative solutions. Projects that generate carbon credits tend to rely on the most ingenious solutions facing climate change. They require novel processes, such as cutting-edge renewable energy technology, carbon capture and storage, energy efficiency, and more. By financially incentivizing the use of these innovations, carbon credits promote the development and deployment of the novel technologies required to meet our long-term climate goals.
5. Promoting Transparency and Accountability
Carbon credits issued by these reputable certification bodies are also checked for integrity and transparency since their verification and monitoring processes ensure that investments in offset projects have truly reduced emissions and were additional and permanent. These processes ensure that the utilization of carbon credits for offsetting is not undermining real and effective action on climate change. Transparency in the carbon credit market will also increase trust among businesses, governments, and consumers.
6. Enabling Flexibility in Climate Action
This flexibility in eventually reaching the emissions reduction goal is one of the great advantages of carbon credits, which can be purchased by companies to offset their emissions by funding a different project that is perhaps hundreds of miles away (geographically infeasible or ‘additional’). In this way, an entity can spread its emissions out across different sectors and different locations.
7. Encouraging Corporate Responsibility
The purchase and retirement of carbon credits has become a badge of corporate conscience: in incorporating the cost of carbon into their bottom line, savvy firms can burnish their green credentials, valued by those of us who care about the climate – both customers and investors. By buying carbon credits, businesses can position themselves as serious about climate action – not just in changing their operations but in contributing to broader global efforts to cut emissions.
8. Providing Financial Support for Climate Projects
Without carbon credits, many such potentially essential climate projects would simply lack funding. Offset projects in many developing countries, for example, depend on their access to carbon credit revenue for financing. Revenue from carbon credits helps to ensure that, for example, community renewable investment continues to generate energy, that forests continue to be conserved, and that water treatment ensures the capture of methane. By purchasing these credits, you help to support the continued viability of such important climate projects.
9. Supporting Climate Policy and Regulation
For instance, large-scale climate policy and regulatory measures, like the Paris Agreement and many regional carbon trading schemes, rely on carbon credits to help achieve their emissions goals. Companies and countries can buy those credits to satisfy regulations and achieve national and global emissions targets.
10. Enhancing Climate Resilience
Investments in carbon credit projects sometimes ‘build’ climate resilience, such as payments for reforestation or afforestation projects, which sequester carbon by planting trees but also restore ecosystems, prevent soil erosions, and increase the water retention capacity of the land. Similarly, projects that generate renewable energy reduce the need for burning fossil fuels and reduce carbon emitters’ dependence on energy that could become unaffordable in the future by generating greater price volatility in fossil fuel markets.
Carbon credits are a key component of the response to the climate challenge and give rise to a variety of benefits for emissions reductions, the Sustainable Development Goals, emerging technologies, and corporate social responsibility. Carbon credits help unlock market-based responses, creating more transparency in the market and bringing competitive finance to critical climate projects.
