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Giving money to individuals or businesses that lower or remove carbon dioxide (CO₂) from the atmosphere is one way to combat climate change.
What is a Carbon Credit?
1. A carbon credit represents 1 ton of CO₂ removed or avoided.
2. Carbon credits can be purchased by businesses or organisations to offset their pollution.
3. People or projects that reduce CO₂ can sell carbon credits and earn money.
How Carbon Credits Work
1. A project reduces or removes carbon dioxide.
Examples: planting trees, using renewable energy, and preventing deforestation.
2. An independent auditor verifies the reduction.
3. A carbon credit is issued for each ton of CO₂ reduced.
4. Companies can buy these credits to balance their emissions.
5. Once used, a credit is “retired” and cannot be used again.
Types of Carbon Credit Markets
1. Compliance Market: The law requires businesses to cut emissions.
2. Voluntary Market: Companies choose to offset emissions for sustainability goals.
Types of Credits:
1. Emission reductions (using cleaner energy)
2. Carbon removal (trees, carbon capture)
3. Avoided emissions (preventing deforestation)
Benefits of Carbon Credits
1. Provides money for projects that reduce carbon.
2. Helps companies meet climate goals.
3. Supports forests, agriculture, and clean energy projects.
4. Encourages long-term environmental protection.
Risks and Things to Watch
1. Not all credits are genuine – some may not really reduce carbon.
2. Avoid double-counting – one ton of CO₂ should not be sold twice.
3. Landowners selling credits may lose rights to claim carbon benefits later.
4. Prices can change, and rules may also change.
Tips for Landowners / Developers
1. Make sure the project has third-party verification.
2. Check the baseline – would carbon reduction have happened anyway?
3. Understand what rights you give when selling credits.
4. Know the long-term commitments (e.g., keeping trees alive).
5. Check market and legal risks before selling.
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