CNaught is building the easiest place for companies and other parties to access voluntary carbon credits and begin to take climate action. But what is a carbon credits and how can those who want to take climate action be sure they are doing the right thing when they purchase them? In this blog post, we explain the basics–which are fairly straightforward–before turning to the fine print, which demonstrates why it is critical to be careful when choosing how to use carbon credits.
A carbon credit is a reduction or removal of emissions of carbon dioxide or other greenhouse gasses. Credits can, but need not be, used to compensate for an equivalent emission somewhere else. They are typically measured in metric tons of carbon dioxide-equivalent–short-handed as CO2e–so that they can ideally be treated as interchangeable, no matter where or how the reduction or removal of carbon dioxide occurs. An credit buyer therefore pays a price per ton of carbon and then uses the carbon credit to offset their emissions elsewhere.
While there are some regulated markets for carbon credits in the European Union and elsewhere, there is also a large voluntary market that is growing rapidly in the United States and around the world. Carbon credits can also be called carbon offsets, though we use the term creditsbecause they need not be used to offset emissions one-to-one.
The science of climate change is unequivocal: we need to transition the global economy to net zero rapidly–by 2050, according to the Paris Agreement–to avoid the most severe consequences. But we cannot just flip a switch and transition to a zero carbon economy. Indeed, entire sectors of the economy like power generation and construction require significant investment and in some cases invention before they can become zero carbon. Individual actors like corporations have limited resources and may not be able to reduce the entirety of their carbon footprint to zero immediately or even over ten or twenty years.
By purchasing high quality carbon credits, companies and other actors can reduce their carbon footprint immediately beyond what would otherwise be financially or even technologically feasible. That is why organizations like the Climate Pledge and Oxford Net Zero recognize that carbon offsets are critical to any path to a net-zero future.
Different carbon credits should be interchangeable–a tonne of carbon should be a tonen of carbon–but, in practice, that is not the case. Instead, some credits are better than others, and the specific details of a given carbon project matter a great deal to whether that project’s credits drive actual climate impact. Below we discuss some of the key attributes that make a carbon credit effective:
Durability: Also called permanence, durability means that the emissions reductions achieved through a carbon project must be long-term and enduring. If a project results in emissions reductions that are only temporary–for example avoiding cutting down a forest, but only for a year or two–it will not provide the lasting benefits buyers seek.
Additionality: Additionality refers to the idea that a carbon project must result in the reduction of greenhouse gas emissions that would not have occurred without the funding from carbon credits. In other words, the project must be “additional” to any actions that would have been taken anyway.
Overcrediting Risk: A project that is additional and permanent may nonetheless issue more carbon credits than realistic assumptions justify, making each individual credit worth less than a tonne. For instance, an avoided deforestation project may over-issue credits if it assumes that an unreasonable rate of deforestation would have occurred absent the carbon project.
On top of all of these differences, carbon credits can vary widely on price from as little as one-to-two dollars per ton to north of $1,000 per ton. And price does not necessarily correlate well to effectiveness. It is therefore difficult–and intimidating!-to find value in the carbon credit market.
While they are a necessary and powerful tool, the details of carbon credits matter greatly to whether the offsets are effective. As a result, carbon credits can be complicated and even intimidating for buyers who want to drive climate impact but are not experts. That’s why CNaught is working to make carbon credits easy: