Qualifies For Carbon Credit Exchanges
A carbon credit is a tradable certificate representing one ton of reduced, avoided, or removed greenhouse gas emissions from a certified climate action project. There are two significant markets for carbon credits – the regulatory market, set by cap-and-trade regulations at the regional and state levels; and the voluntary market, where businesses, individuals, and communities buy credits of their own accord to offset their own emissions.
The carbon credit exchange market offers a powerful mechanism to achieve the global goal of keeping warming below 2°C by 2050. However, not all carbon credits are created equal. A credit may be valid if it has been issued under a recognized program, is backed by an appropriate government authority and verified by a credible third party, and meets stringent requirements. Those requirements are designed to ensure that only high-integrity carbon projects make it to the market.
In the regulated carbon market, companies are encouraged to reduce their own greenhouse gas emissions and sell any leftover allowances (i.e., carbon credits) to other companies that are over their own emission limits. Proponents of the cap-and-trade system argue that this encourages companies to invest in technology innovations and improved management practices, which can ultimately lead to more efficient, lower-emission production.
What Qualifies For Carbon Credit Exchanges?
As more and more businesses take up the climate change challenge, many find that they cannot eliminate their own emissions entirely or lessen them as quickly as they would like. This is where the carbon offset market comes in, with organizations able to buy credits for their remaining emissions from projects that meet strict criteria. Companies that participate in this voluntary market are demonstrating to consumers and investors that they are taking the threat of climate change seriously, and are willing to pay for it.
Buying carbon credits also helps airlines, cruise lines, and other travel industry operators meet their own, voluntary targets for reducing their own carbon emissions. For instance, they can use offsets to further mitigate their emissions from aviation fuel.
When it comes to carbon offsets, there are a few key attributes that need to be met in order for them to be considered of the highest quality:
1. Additionality: The emissions reductions must be above and beyond what would have happened in the absence of the project. 2. Permanence: The emission reductions need to be permanent and not just a temporary shift in activities (e.g., deforestation).
3. Verifiability: The carbon project must be validated and reported by a credible, third-party organization.
4. Sustainability: The project must have additional positive second-order impacts on people or the environment in addition to reducing GHGs. This could include local biodiversity preservation, water and soil quality improvements, and economic equality.
To create a robust, high-integrity carbon credit market, it is important to develop a resilient infrastructure for trading and post-trade activities. This should include a carbon credit exchange, clearinghouse, meta-registry, and financing for developers. These elements must be combined with advanced data infrastructure to enable more efficient matching of buyers and sellers. A carbon credit marketplace will only work if it can link buyers and suppliers through core carbon principles, standard attributes described in a common taxonomy, and a robust verification methodology.
