Want to purchase carbon credits to reduce your carbon footprint but not sure how to do this? We walk you through the buying process for carbon credits.
As the world progresses toward Net Zero, more and businesses are able to offset their carbon footprint by investing in sustainable projects all over the world. But how exactly does offset work? What are your options to buy carbon offsets?
What is carbon offset through purchasing carbon credits?
Carbon offset is the process of buying carbon credits in the carbon market created through CO2 absorption projects to offset the emissions of a person or company. The first step is to calculate the carbon footprint for your business. For example, suppose a company released 1,000 tonnes in greenhouse gas (GHG) during the course of a year. To mitigate the carbon footprint, it would have to purchase 11,000 carbon credits one representing 1 ton CO2-equivalent. This accounting method is a easy way to make sure that the earth doesn’t produce more than it is able to absorb in addition to providing crucial financing for projects to reduce carbon emissions.
When you have a clear idea of the carbon footprint of your home and have implemented measures like changing to clean energy or reducing the consumption of electricity to lower the amount, it’s now time to offset your remaining carbon emissions with carbon credits. What are good carbon credits? Or are they bad ones?
Many ways to purchase carbon credits.
There are a variety of ways to purchase carbon credits in order to reduce your carbon footprint including on a carbon credit exchange.
Purchase carbon credits directly from the developers
The easiest way to purchase them is to go to the source, which is from the entity that is responsible for the project you wish to help. In this scenario you can choose to invest in the process of developing the project, with the promise of a reward in the form future carbon credits, or purchase what are known as Emission Reduced Purchase Agreements (ERPAs) which are a prepayment for carbon credits that are provided at the time they are created. This is more prevalent in cases where the project is in the later stages of development.
There are two major advantages of purchasing carbon credits from your developer of the project:
It allows you to gain an in-depth knowledge of the project and become involved in the management of the project
you will get lower rates than the reseller
However, this choice isn’t an option for everyone.
it takes an amount of study and understanding to determine and pursue the most suitable initiatives.
Carbon credits aren’t immediately available when you purchase the credits. They are not immediately available when you purchase
Carbon credits can be purchased through an intermediary
A lot of project developers collaborate with brokers to organize the purchase the carbon credits they have. In this instance the company should connect with the broker and provide them details about the kind of project you’re interested in (location prices, location, etc.). The broker would locate the project that is suitable for you and then purchase carbon credits on behalf of your company and then resell them back to you at a profit.
This approach may be more feasible than directly with a project, especially in the case of a significant amount of carbon offsets. As an intermediary the broker manages every transaction.
However, there are some major negatives to be considered:
Brokers do not disclose their pricing structure, which means you don’t know what the cost of the carbon credit and the broker’s fee
In certain instances the brokers are charged by companies nearly three times the amount they charge project developers and thereby utilizing their power as middlemen, and thus defeating the goal of climate finance.
The Financial Times recently exposed just how the opaque carbon credit broker’s methods could be. This isn’t a choice we would recommend.
UK Business News