Carbon Credits
Carbon Footprint Solutions

How to Obtain Carbon Credits?

The carbon credit industry has experienced significant growth in recent years, leaving many wondering how they can obtain these credits. This surge in popularity can be attributed to a variety of factors, such as increased regulation, improved standards, and greater accessibility.

Despite the complexity of the carbon credit market, obtaining these credits is becoming increasingly feasible. With the right information and resources, interested parties can take advantage of the current boom and secure carbon credits for their own use.

First of all, what are carbon credits exactly?

Carbon credits are units that represent one metric ton of carbon emissions. These credits can be bought and sold in the carbon market. A single carbon credit offsets one metric ton of carbon emissions. There are two types of carbon markets: Compliance Carbon Markets (Regulatory Markets) and Voluntary Carbon Markets (VCM).

Compliance Carbon Markets (Regulatory Carbon Markets)

Compliance carbon markets, also known as regulatory carbon markets, are government-regulated markets where industries are given a set limit on the amount of carbon they can emit. The largest compliance carbon markets are found in the European Union, China, Australia, and Canada. The goal of these markets is to reduce carbon emissions and mitigate the effects of climate change.

In compliance carbon markets, companies within a given industry are responsible for staying under their allotted carbon amount. However, for some companies, meeting their carbon threshold can be challenging due to various factors such as the unavailability or inaccessibility of emission reduction technology, or the reliance on fossil fuels for electricity generation. To offset any excess carbon emissions, companies can purchase carbon credits.

Carbon credits are a form of tradeable permit that allows companies to offset their carbon emissions by investing in environmental projects. There are two types of carbon credits available on the compliance carbon market: permits to pollute and project-based reduction credits.

Permits to pollute are essentially fees paid by companies for exceeding their carbon limit. The fees increase annually, and the permitted amount of carbon emissions also shrinks each year to encourage companies to reduce their emissions. The purchase of permits to pollute is not necessarily a favorable option for companies as the fees can be quite excessive.

On the other hand, project-based reduction credits allow companies to offset their carbon emissions by investing in environmental projects such as forestry and conservation, improved agriculture practices, and renewable energy. Project-based carbon credits are also known as carbon offsets, and one metric ton of carbon is offset from the atmosphere through environmental projects for every carbon offset purchased.

Project-based reduction credits enable companies to do more than just buy permits to pollute. It allows them to take positive action to mitigate the effects of their carbon emissions and become carbon neutral.

It is important to note that project-based reduction credits are not only available on the compliance carbon market but also on the voluntary carbon market. The voluntary carbon market is a market where individuals and companies can purchase carbon credits voluntarily to offset their carbon emissions.

Overall, the compliance carbon market is a crucial tool in mitigating the effects of climate change. By regulating carbon emissions, it encourages companies to reduce their carbon footprint and invest in environmental projects.

Voluntary Carbon Market (VCM)

The Voluntary Carbon Market (VCM) is a market where individuals, NGOs, and companies can purchase carbon offsets voluntarily. Unlike the compliance market, the VCM is not regulated by the government, and companies purchase credits on the VCM because they see the value that carbon credits and offsets can bring to their organization and lives by making them carbon neutral.

Carbon offsets are available to everyday consumers, making it a more inclusive market. The VCM works differently because it is entirely voluntary. No government regulation or mandate causes companies or individuals to purchase credits on the VCM.

Carbon credits and offsets for the VCM are verified by third parties. Third-party entities are non-profit organizations that ensure that customers receive what they are paying for. They measure the amount of carbon offset through an environmental project and interpret the data, giving any offset project with their seal a green light for approval.

The Verified Carbon Standard (managed by Verra), the Gold Standard, the American Carbon Registry (managed by Winrock), and Climate Action Reserve are some of the third-party verifications that ensure that offset projects are high-quality. These entities are committed to ensuring that those purchasing offsets aren’t throwing their money into something that isn’t real.

Verra, which is considered by many to be the premier standard, has a network of auditors on hand to follow up on all Verra-approved offset programs. They oversee all operational aspects, aligning them with stringent standards as set by Verra. To date, more than 1,775 certified VCS projects have collectively reduced or removed more than 865 million tons of emissions from the atmosphere.

Overall, the VCM is an important market for individuals, NGOs, and companies to voluntarily purchase carbon offsets and credits to make their organizations and lives carbon neutral. The third-party verifications ensure that offset projects are high-quality, making it a reliable market to invest in.

Where Can You Purchase Carbon Offsets?

Carbon offsets can be purchased through a variety of channels, including airlines and third-party marketplaces such as Nori, Gold Standard, and South Pole. Additionally, individuals who own or operate land can produce and sell carbon offsets themselves.

Nori

Nori is a marketplace that works with individuals, companies, and NGOs to make purchasing carbon offsets simple. On their website, users can select “remove carbon” and enter the number of credits they would like to purchase. Currently, each credit costs $15, with an additional 15% fee for processing. Nori also offers tools for business owners to calculate their carbon emissions and purchase a subscription of offsets each month. To date, Nori has offset 75,553 metric tons of carbon.

Gold Standard

Gold Standard is one of the oldest carbon offset marketplaces, with over a decade of experience. They have created 2,300 projects in 98 countries and have reduced 191 million tons of carbon. Customers appreciate the ability to personalize their purchases by selecting projects that align with their values.

South Pole

South Pole has developed over 700 climate action projects worldwide. They offer carbon calculators for individuals and organizations to calculate their carbon footprint and find projects that align with their needs.

Individuals who own or operate land can also produce and sell carbon offsets themselves. This can be done through practices such as conservation tillage or no-tillage, nutrient management, and precision farming. Third-party experts from verification sites such as Verra, Verified Carbon Standard, and Climate Action Reserve can verify data from the property and conduct site visits to determine the number of offsets the project is eligible to receive. With the expected expansion of the Verified Carbon Market over the next decade and beyond, these projects have excellent earnings potential.

The Price of Carbon Offsets is Increasing

As the world moves towards achieving net-zero emissions, the demand for carbon offsets has skyrocketed. Carbon offsets are essential in achieving net-zero and neutrality goals, and their increasing demand has led to a surge in prices. The current price for carbon offsets in the European Union is over €80/ton, and the prices continue to rise due to the low supply.

California is the only state in the U.S. with a strict carbon market, which is where most offsets are sourced. However, other states are beginning to take the lead in the carbon offset industry. This presents a significant income potential for farmers in Europe and the U.S. as the industry continues to grow.

Despite the high prices, there is still a surplus of carbon credits in the market. However, this surplus is expected to decrease as demand continues to rise. The volume, prices, and value of the carbon offset market through August 2021 are shown in the table below:

Volume (million tons CO2e) Price (€/ton CO2e) Value (€ million)
104.8 25.74 2,697.5

In conclusion, the increasing demand for carbon offsets has led to a surge in prices, and this trend is expected to continue. The carbon offset industry presents an excellent opportunity for farmers in Europe and the U.S. to generate income while contributing to the fight against climate change.

What about green investments?

Investing in green initiatives has become increasingly popular in recent years, as people become more aware of the environmental impact of their investments. There are various ways to invest in green initiatives, such as carbon credits, carbon ETFs, and carbon stocks.

One way to identify environmentally conscious funds is by using the Fossil Free Fund. This tool helps investors find mutual funds and ETFs that prioritize sustainability and climate action projects. Additionally, investors can search for funds they currently hold to see if they are invested in the fossil fuel industry and make changes accordingly.

Investors can also look for funds through companies committed to green initiatives, such as Tesla (TSLA) and Brookfield Renewable Partners (BEP). Funds with carbon credit futures are another option, although they are considered the riskiest due to their lack of diversity.

For those interested in investing in specific stocks, there are several options available. The iShares MSCI ACWI Low Carbon Target ETF (CRBN) and SPDR MSCI ACWI Low Carbon Target ETF (LOWC) are both focused on low-carbon emissions companies. The VanEck Low Carbon Energy ETF (SMOG) invests in companies involved in alternative energy sources. Meanwhile, the BlackRock U.S. Carbon Transition Readiness ETF (LCTU) and BlackRock World ex U.S. Carbon Transition Readiness ETF (LCTD) invest in companies that are transitioning to a low-carbon economy.

Investors can also consider investing in green bonds, such as the iShares Global Green Bond ETF (BGRN) and VanEck Vectors Green Bond ETF (GRNB). These bonds support projects with positive environmental impacts, such as reforestation and carbon reduction projects.

It is important to note that investors should be cautious of greenwashing, where companies falsely advertise their environmental impact. Investors should do their research and look for companies with a genuine commitment to sustainability and reducing their environmental impact.

Overall, investing in green initiatives can be a great way to diversify a portfolio while also making a positive impact on the environment.

Carbon Market Growth

Experts predict that the carbon market will experience significant growth in the coming years. Based on demand projections and the volume of negative emissions needed to meet the 1.5-degree warming goal, the market size for carbon offsets could range from $5 billion to $30 billion at the low end and more than $50 billion at the high end by 2030. Some experts even believe that the market could reach $100 billion by 2030, up from just $300 million in 2018.

Carbon credits and offsets not only help companies and individuals meet emissions goals but also provide an opportunity for farmers and landowners worldwide to earn extra income. This makes carbon credits a win-win solution for both economic development and climate change mitigation.

As the demand for carbon credits continues to increase, the carbon market is poised for significant growth in the coming years.

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I'm a writer for lifestyle publications, and when I'm not crafting stories, you'll find me cherishing moments with my family, including my lovely daughter. My heart also belongs to my pets—Sushi, Snowy, Belle, and Pepper. Besides writing, I enjoy watching movies and exploring new places through travel.

I'm a writer for lifestyle publications, and when I'm not crafting stories, you'll find me cherishing moments with my family, including my lovely daughter. My heart also belongs to my pets—Sushi, Snowy, Belle, and Pepper. Besides writing, I enjoy watching movies and exploring new places through travel.

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