Carbon Credits And Carbon Offsets - How Do They Work?

As global carbon emissions continue to rise and act like a massive blanket that keeps the planet warmer, economists recognize that to avoid more unwelcome consequences from climate change, CO2 must have a price, which will then be integrated into the economy. The carbon credit mechanism began with the consent of the Kyoto Protocol and since it started, the vast number of certified voluntary projects has helped decrease more than 440 MtCO2e, which can be compared with the equivalent of one billion barrels of oil.

The same method is used within the EBCF land, which allows to attracting carbon offset credit income by generating several social and environmental benefits from:

  1. Strengthening of environmental monitoring and control;
  2. Income Generation Through the Promotion of Sustainable Businesses; and
  3. Community Development, Scientific Research, and Education.

EBCF’s economic purpose is to support a variety of eco-services and business-related activities to fund its social-environmental mission, based on seven distinct revenue streams, where Carbon Credits are included.

What Is a Carbon Credit

A carbon credit is the legal right to release one tonne of CO2 or equivalent greenhouse gas to the environment. Such legal right is acquired with certificates or permits assigned to companies and organizations. When a corporation offsets one tonne of CO2, it means there will be one less tonne of CO2 in the atmosphere than there would exist otherwise without carbon credits.

How Does The System of Carbon Credits Work

The carbon markets and environmental offsets work within regulatory or voluntary models.

  • Regulatory market - it depends on a set of rules and methods set out by the State or through an agreement between States. Here, nations hold emission reduction objectives and control their carbon footprint to follow those same objectives. For this, they trade credits nationally and internationally, usually via CERs (Certified Emission Reductions) or CDM (Clean Development Mechanism) – connected to the energy, transport, and forestry sectors.
  • Voluntary market - it trades carbon credits and environmental offsets outside a governing system but based on certifications. Here, sectors and businesses have are restricted in their greenhouse gas emissions, and when the limit is exceeded a tax is imposed. To evade this tax, sectors and businesses can acquire offsets in the market, from other corporations, or NGOs, sectors, etc. In this market, the principal credit mechanism is the REDD (Reduced Emissions from Deforestation and Forest Degradation). By using the REDD credits, businesses fund forest conservation projects before deforestation. As a result, businesses can present themselves as environment-friendly.

In the case of the Amazon rainforest, the Suruí Forest Carbon Project was the first REDD project to be developed and run by indigenous people. The Suruí’s Seventh of September territory covers an area of 248,000 hectares on the border of the states of Rondônia and Mato Grosso. The chief of the Suruí, AlmirSuruí, has been lauded internationally for his role in promoting the project. In 2013, he won the UN Forest Hero Award and in the same year, the Suruí project sold 120,000 carbon credits to Natura, a Brazilian cosmetics firm. The following year, FIFA bought carbon credits from the Suruí to “offset” emissions from the World Cup.

What is The Carbon Credit System impact on Businesses and Organizations

When businesses offer Fairtrade products, they can choose to buy credits to compensate for all the emissions in that product’s supply chain. They can then call their product climate-friendly.

Governments, businesses, and users would be affected by the extent to which such prudent measures are included in their decision-making process.

Moreover, companies that invest in carbon credits can prove their dedication to tackling global climate change and decreasing their environmental impact. Furthermore, such companies are often seen as more favorably by green-minded customers.

With the innovation of technology, EBCF will be allowed to dynamically monitor and determine the changing value of the rainforest – such as the real Carbon Footprint value when connected to the Carbon Credits market but also develop applications and services with real data and real requirements that can be re-used and reapplied globally.

What Is The Relationship Between Carbon Offsets and Carbon Credits

One of the most prominent differences between credits and offsets is that the previous is obligatory and the latter voluntary.

Carbon offsets are also measured by a tonne of CO2 or equivalent greenhouse gas, but instead of representing when a company emits less carbon than their limit, they are created when a business chooses to invest in something that decreases greenhouse gas emissions outside of their everyday operations. These investments are identified as carbon projects.

In combination with other sustainability efforts, carbon offsetting confirms that businesses are willing to do what it takes to make sure that the environment is getting the best possible treatment.