The urgent global challenge that is Climate Change is likely the most talked-about topic of this millennium. Since the late 1990s, increasing concern about pollution and greenhouse gases has exploded into global mass action to reduce carbon emissions in order to keep our planet habitable.
As individuals and businesses become increasingly aware of their carbon footprints, solutions like carbon offsets have emerged as a practical means to mitigate emissions. In this article, we will explore what carbon offsets are, distinguish them from carbon credits, delve into their purpose, examine who buys them and why, and highlight the benefits of selling carbon offsets as a business.
What are carbon offsets?
Carbon offsets are financial instruments that help neutralise carbon emissions by investing in projects that reduce or remove an equivalent amount of carbon dioxide (CO2) or other greenhouse gases from the atmosphere. These projects often focus on renewable energy, energy efficiency, reforestation, and methane capture, but offsets can also be sold by enterprises or businesses that are running on cleaner energy. By creating a financial value for emissions reductions, carbon offsets promote the transition to a low-carbon economy and help achieve climate goals.
By purchasing carbon offsets, individuals and businesses can compensate for their own emissions and support sustainable initiatives. Basically, in order to balance the “positive carbon emissions” that a company emits, they can purchase “negative carbon emissions” to mitigate their overall environmental impact.
Who can sell carbon offsets?
Carbon offset projects – or those projects that can sell carbon offsets into the market – can be large corporations, companies, smaller enterprises, or even individuals, who are participating in activities that mitigate carbon emissions. This can include things like using renewable energy, contributing to reforestation projects, or even buying carbon offsets from other verified projects.
Carbon offset projects need to undergo rigorous verification processes to ensure their credibility and environmental integrity before they can sell to the market. Independent third-party auditors assess projects against recognized standards such as the Verified Carbon Standard (VCS), Gold Standard, or Climate Action Reserve. Verification ensures that the emissions reductions claimed by the project are accurate, transparent, and scientifically robust.
Carbon Offsets vs Carbon Credits
While the terms are often used interchangeably, carbon offsets and carbon credits have subtle differences. Carbon offsets are the units of measurement representing the reduction of greenhouse gas emissions. They are generated through projects that are independently verified and adhere to recognized standards.
On the other hand, carbon credits are tradable units representing a specific amount of greenhouse gas emissions. Carbon credits can be earned through emission reduction initiatives or purchased to comply with emission reduction obligations, such as in cap-and-trade systems. In essence, carbon credits are the tradable assets derived from carbon offsets.
The purpose of Carbon Offsets
Carbon offsets were invented to address the urgent need for reducing greenhouse gas emissions and combating climate change. Carbon offset monetisation provides a market-based mechanism to incentivize individuals and businesses to invest in projects that reduce emissions or contribute to sustainable development. By creating a financial value for emissions reductions, carbon offsets promote the transition to a low-carbon economy and help achieve climate goals.
Who buys Carbon Credits?
Certain companies are required to invest in carbon credits to offset their carbon emissions due to regulatory frameworks or voluntary commitments. For instance, under cap-and-trade systems, companies are allocated a specific number of emissions allowances. If they exceed these allowances, they must purchase additional carbon credits to offset the excess emissions and comply with the regulations. Similarly, organisations committed to sustainability voluntarily invest in carbon credits to align their operations with their environmental goals and enhance their reputation.
The funds to purchase carbon offsets typically come from businesses or individuals looking to compensate for their carbon emissions. Companies allocate a portion of their budget for sustainability initiatives, which may include purchasing carbon offsets. Individuals concerned about their personal carbon footprint can choose to buy carbon offsets as well. Governments, institutions, and voluntary programs may also contribute funds for carbon offsets as part of their sustainability strategies or compliance with emission reduction targets.
Benefits of Selling Carbon Offsets as a Business
Selling carbon offsets can bring numerous advantages to businesses:
1. Additional Revenue Stream
By selling carbon offsets, businesses can diversify their income sources and generate additional revenue, contributing to their financial stability and growth. Businesses can do this through the Decarb.earth App.
2. Enhanced Reputation
Engaging in carbon offsetting demonstrates a company's commitment to sustainability and environmental stewardship. It strengthens its reputation, attracts environmentally conscious customers, and fosters brand loyalty. These businesses are already seeing the benefits of showing their customers their commitment to clean energy.
3. Compliance with Regulations
Selling carbon offsets helps businesses meet regulatory requirements and reduce penalties or fines associated with exceeding emissions allowances.
4. Access to New Markets
Businesses that sell carbon offsets can tap into the growing market for emissions reductions, particularly in sectors where carbon emissions are heavily regulated or monitored.
In Conclusion
Carbon offsets play a vital role in combating climate change and transitioning towards a sustainable future. They enable individuals and businesses to take responsibility for their carbon emissions by investing in projects that reduce or remove greenhouse gases.
If your business is running on clean energy, you would be eligible to earn carbon offsets. Get in touch with us to find out more, or simply Sign up at Decarb.earth, to get started.