Matthew Loughran, EMBA
April 19, 2022
When it comes to climate change, individuals, businesses and governments all have a responsibility to take action to reduce greenhouse gas emissions. One way to do this is by purchasing carbon credits.
What are carbon credits?
Carbon credits are a unit of measurement that represents the reduction of greenhouse gas emissions. One carbon credit is equal to one metric ton of carbon dioxide or its equivalent in other greenhouse gases. A carbon credit is a certificate that represents the amount of CO2 emitted by a person or company. Greenhouse gas emissions can be reduced through planting trees, investing in renewable energy, or improving energy efficiency. The more CO2 you emit, the more credits you need to invest in an activity that will absorb it, like a forest garden.
Reducing emissions is essential because greenhouse gases trap heat in the atmosphere and contribute to climate change. Climate change is a global problem that requires action from individuals, businesses, and governments around the world.
Carbon credits give businesses and individuals a way to offset their emissions and support projects that reduce greenhouse gas emissions. When a company or individual purchases carbon credits, they are investing in a cleaner future and helping to reduce the impact of
How do they work?
A carbon credit is a permit that allows a company to emit a set amount of greenhouse gases. The credit is meant to offset the emissions by reducing them elsewhere, like planting trees. For example, if a factory wants to emit more carbon dioxide than its allotted amount, it would have to purchase carbon credits from a company that has not exceeded its limit.
The idea behind carbon credits is to give companies an incentive to reduce their emissions because they can sell their credits if they don’t use them. It also puts a price on carbon emissions, which some argue is necessary to change behavior and get people to think about the environmental impact of their actions.
Critics say that carbon credits are too complicated and that they don’t actually reduce emissions.
How do you buy carbon credits?
A carbon credit is a generic term for any tradable certificate or permit representing the right to emit one tonne of carbon dioxide or its equivalent of a different greenhouse gas (GHG) into the atmosphere. Carbon credits and carbon markets are a central component of national and international attempts to mitigate the growth in concentrations of GHGs. GHG emissions are capped and then allocated or sold to emitting industries or entities, which are required to hold enough allowances to cover their emissions.
The most common type of carbon credit is called an emissions trading plan, or “cap and trade.” With this system, the government caps the total amount of GHGs that can be emitted each year. Then, it allocates or sells “allowances” to emitting companies, which represent the trade side. Carbon credits can be bought and sold on the open market. The idea behind carbon credits is that those who pollute the most will pay more to offset their emissions. This money can then be used to fund projects that reduce carbon dioxide emissions.
How much do they cost?
Most people are aware of the term “carbon footprint,” but fewer know what carbon credits are and how they work. One carbon credit is equivalent to one metric ton of carbon dioxide, and it can be bought and sold in order to help offset emissions. For example, if a company emits one metric ton of carbon dioxide, it can buy one carbon credit to “offset” its emissions.
The cost of carbon credits varies depending on the market and the specific project. However, they are typically a few dollars per metric ton of carbon dioxide. The price of carbon credits fluctuates depending on demand; buying carbon credits is not the only way to offset emissions, but it becomes very efficient for companies. There are a number of ways to reduce emissions, such as investing in renewable energy, energy efficiency, or planting trees. Carbon credits can be used to finance these projects. When a company or individual reduces their emissions, they receive carbon credits. They can then sell these credits on the carbon market.
Matthew is an accomplished senior executive and social impact entrepreneur in the emerging technology field. Matthew is the principal at Midtown West Media, founder, and editor of Social Impact Insider. Matthew possesses a history of multilateral stakeholder alignment across public, private and faith-based sectors leveraging technology for social impact. Matthew holds a B.S. in Biology and Marketing from Loyola University Maryland; and an Executive M.B.A. from Washington State University. Matthew also holds multiple certifications in strategic board service including long-term growth, M&A strategy, cybersecurity, and strategic communications.
