In the last decade, the world has greatly evolved into seeing climate action as a dire step to restore and rehabilitate the planet. The objective is protection over profit, and in this pursuit, companies, NGOs, and the government have gathered together to create a net zero future.

Today, businesses increasingly understand climate palettes and the need for tangible actions. There has been a growing adoption of carbon offsets to neutralize carbon footprints, resulting in an exponential growth of the global carbon credit market.

Definition

A carbon credit is an offset mechanism issued for an equivalent reduction or absorption of carbon emissions from the atmosphere due to a targeted carbon reduction project.

These issued credits are then supplied to anyone and everyone aiming to reduce their carbon footprint. So carbon credits are a way to reduce your carbon footprint caused by inevitable emissions.

By purchasing carbon credits, companies finance other projects that help reduce greenhouse gas emissions.

History

Carbon trading started formally in 1997 under the United Nations’ Kyoto Protocol on climate change with more than 150 nations' signatories.

Parties with commitments under the agreement agreed to limit or reduce their greenhouse gas emissions between 2008 – 2012 to 5.4%, which was well below the levels of 1990.

Emissions trading, as set out in the Kyoto Protocol, allowed countries to sell the excess capacity of emission units to countries with levels sufficiently over their targets.

Compliance & Voluntary Markets

Carbon markets have successfully controlled GHS emissions by enabling their trading to achieve emission limits.

There are predominantly two types of carbon markets – the compliance market and the voluntary market.

The compliance carbon markets are developed as part of a nation’s/region’s obligation to cut their emission or bring it under a defined gap limited by global accords like the Kyoto Protocol or the Paris Climate Change accord.

The voluntary carbon markets are created by independent organizations committed to lowering their carbon footprint as part of their circular business model initiatives.

Compliance markets are created and regulated by mandatory national, regional, or international carbon reduction regimes. Voluntary markets function outside compliance markets and enable companies and individuals to purchase carbon offsets voluntarily with no intended use for compliance purposes.

Action Plan

Companies can purchase carbon credits to compensate and neutralize their residual emissions according to their reduction strategy.

Residual emissions include uncontrollable, negligible quantities of emissions resulting in business processes.

Control the uncertainty of your carbon emissions by identifying, monitoring, and neutralizing the weak spots.

  1. Measure your company's and products' carbon footprint;
  2. Identify your impact hotspots;
  3. Create and implement an emissions reduction strategy with clear targets and performance metrics;

Compensate What You Can't Reduce

Fill the gap between implementing actions and results by compensating for residual emissions.

  1. Communicate your efforts transparently;
  2. Search or create projects capturing carbon emissions;
  3. Buy carbon credits;