If your business is looking to reduce its carbon footprint and adopt more sustainable practices, one option to consider is the use of carbon credits.

What are carbon credits?

Carbon credits are a type of market-based instrument that allow companies, governments, and other organizations to address their greenhouse gas emissions by funding projects that reduce or remove carbon dioxide or other harmful greenhouse gas (GHG) emissions from the atmosphere.

The goal of carbon credits is to create a financial incentive for businesses to reduce their carbon footprint and invest in cleaner, more sustainable business practices.

What is the carbon market?

The carbon market is a system for buying and selling carbon credits, which are instruments that allow companies, governments, and other organizations to address their greenhouse gas emissions by funding projects that reduce or remove carbon dioxide from the atmosphere. There are several different types of carbon markets, including cap-and-trade systems, voluntary carbon offset markets, and compliance markets.

How do carbon credits work?

One way that carbon credits work is the creation of carbon offset projects, such as reforestation or even the development of sustainable aviation fuel (SAF). These projects are designed to reduce or remove carbon dioxide from the atmosphere, and the resulting credits can be bought and sold on the carbon market.

To receive carbon credits, a project must be independently verified as reducing or removing carbon dioxide from the atmosphere. This process can be complex and requires the use of specialized methods and protocols to ensure the accuracy and integrity of the credits.

Read more: Choosing the right carbon offset projects for your company.

Are carbon offsets and carbon credits the same thing?

The term ‘carbon offset’ is often used interchangeably with ‘carbon credits’ which can be correct, but they’re not necessarily the same thing. Carbon offsets are a type of carbon credit that are specifically used to offset an organization's own emissions by funding projects that reduce or remove carbon dioxide from the atmosphere. There are, however, other types of carbon credits which go beyond offsetting, for example sustainable aviation fuel (SAF) actually reduces carbon. Learn more about SAF here.

Who regulates carbon credits?

The regulation of carbon credits varies depending on the jurisdiction and the specific type of carbon credit program. At the international level, the United Nations Framework Convention on Climate Change (UNFCCC) is the primary body responsible for regulating carbon credits and other market-based instruments for reducing greenhouse gas emissions.

At the national level, carbon credit programs are often regulated by government agencies or other regulatory bodies. For example, in the European Union, the European Commission is responsible for regulating the EU Emissions Trading System (EU ETS), which is a cap-and-trade system for reducing greenhouse gas emissions. In the United States, the Environmental Protection Agency (EPA) is responsible for regulating various programs related to greenhouse gas emissions, including the voluntary carbon offset program.

How do you know if carbon projects are high quality?

There are several ways to ensure that carbon projects and carbon credits are high quality and reach the environmental and social impacts the project set out to achieve:

1. Independent verification: Carbon projects should be independently verified by a third-party organization to ensure that they are accurately measuring and reducing or removing carbon dioxide from the atmosphere. This process can be complex and requires the use of specialized methods and protocols to ensure the accuracy and integrity of the credits.
2. Accreditation from internationally recognized standards: Carbon projects should adhere to recognized standards, such as those set by the Verified Carbon Standard (VCS) or the Gold Standard, which are widely recognized as high-quality standards for carbon credits.
3. Transparency: Carbon projects should be transparent and open to public scrutiny to ensure that they are accurately measuring and reducing carbon emissions.
4. Additionality: Carbon projects should demonstrate that the emissions reductions they achieve are "additional" to what would have occurred without the project. This ensures that credits are only given for emissions reductions that would not have happened otherwise.

How can you participate in the carbon market?

If this all seems like a lot to remember and monitor, that’s because it is! Many businesses employ in-house climate experts or hire sustainability consultants and carbon credit brokers that can advise on high-quality projects, amounts of carbon to address, and ways to reduce your carbon footprint.

CHOOOSE works to make sustainability more accessible to everyone by automating these processes with our suite of climate products. From global companies looking to engage their own customers in climate action to small businesses that want to minimize their carbon footprint, we work with our ecosystem of partners to address their needs. Learn more about how CHOOOSE can help your business here.

Are carbon credits an effective tool to help the environment?

Carbon credits have been used for many years as a way to reduce greenhouse gas emissions and combat climate change. While they have been controversial at times, they are generally seen as an effective tool for reducing carbon emissions and encouraging the adoption of cleaner, more sustainable forms of energy.

About us: CHOOOSE™ is a venture-backed leader in technology-based climate action, building digital tools so that everyone, anywhere, can easily integrate climate action into everyday life and business. Through flexible integrations, customer-friendly interfaces, automated carbon measurement, and a connected marketplace of climate solutions, CHOOOSE delivers a complete platform that enables its partners to build and manage high-impact climate programs. Learn more at www.chooose.today.