Carbon credits, also known as carbon offsets, are a mechanism used to mitigate greenhouse gas (GHG) emissions and combat climate change. They work on the principle of allowing individuals, organisations, or countries to compensate for their carbon emissions by investing in projects that reduce or remove an equivalent amount of emissions elsewhere. Here’s how carbon credits work:
1. Emissions calculation:
The first step is to determine the amount of carbon dioxide (CO2) or other GHG emissions produced by a particular activity, such as industrial processes, transportation, or energy consumption. This can be measured in metric tons of CO2 equivalent (CO2e), which includes other greenhouse gases like methane (CH4) and nitrous oxide (N2O) converted into their CO2 equivalent.
2. Offset project selection:
After calculating the emissions, individuals or organizations can choose to invest in projects that reduce emissions or remove carbon from the atmosphere. These projects can include renewable energy installations, forest conservation initiatives, methane capture from landfills or livestock, reforestation projects, or energy efficiency programs. The projects should be independently verified and follow recognized standards, such as the Clean Development Mechanism (CDM) or Gold Standard.
3. Carbon credit issuance:
Once the offset project is selected, the project generates carbon credits based on the amount of emissions it reduces or removes. Each carbon credit represents one metric ton of CO2e. These credits are certified and tracked to ensure their credibility and transparency. Independent third-party organizations, such as the Verified Carbon Standard (VCS) or the Climate Action Reserve, validate and verify the credits.
4. Purchase and retirement:
Individuals, organizations, or countries interested in offsetting their emissions can purchase carbon credits from projects. The price of carbon credits can vary based on factors such as the project type, certification standards, and market demand. Once purchased, the carbon credits are retired, which means they are permanently taken out of circulation to ensure they are not double-counted or used by multiple entities.
5. Carbon neutrality and compliance:
By investing in carbon credits and retiring them, individuals or organizations can claim carbon neutrality or carbon neutrality for a specific activity or scope of emissions. This means that the emissions associated with that activity are balanced or offset by an equivalent amount of emissions reductions or removals elsewhere. Carbon credits can also be used by companies to meet regulatory compliance requirements, such as emissions caps or targets set by governments or international agreements.
It’s important to note that while carbon credits can help in offsetting emissions, they are not a complete solution to climate change. It’s crucial to prioritise efforts to reduce emissions at the source through energy efficiency, renewable energy adoption, and sustainable practices. Carbon credits should be seen as a complementary tool to achieve carbon reduction goals and support the transition to a low-carbon economy
