What is a carbon credit?

How to tell your compliance carbon credits from voluntary carbon credits, and more

Thomas Herry

The Basics

3 mins

A carbon credit, also known as a carbon offset, is a certificate for the reduction of one tonne of carbon from the atmosphere. This can be achieved in two ways: By changing the way a company operates to reduce the amount of carbon it produces, or by removing carbon already present in the atmosphere — for example by planting trees that capture carbon as they grow.

The carbon credit world can be confusing because there are different types of carbon credit. These are known as: compliance carbon credits and voluntary carbon credits. Compliance carbon credits are allowances granted by governments, in limited amounts, to cap emissions from heavily polluting companies.

Unfortunately, current policies are insufficient to meaningfully fight global warming, and many companies have volunteered to further reduce their emissions. To achieve carbon neutrality — where all emissions are balanced by offsetting — they adjust the way they manufacture products, source energy and use transport. But often, this is not enough to reach carbon neutrality as some emissions are very difficult to avoid. This is where voluntary carbon credits come into play.

Voluntary carbon credits: Explained

Voluntary carbon credits give companies the opportunity to support a carbon reduction project to compensate for the emissions they cannot avoid. It doesn’t matter who removes carbon from the atmosphere; what matters is to make sure it gets done.

These carbon credits can be generated by farmers, landowners, NGOs and any project developers that undertake reforestation, energy efficiency or renewable energy projects. These projects are audited by independent third parties before a certificate is issued. The sale of carbon credits will then help finance the project and reward project owners for reducing the amount of carbon in the atmosphere.

So, with carbon credits, anyone can decide to reduce their emissions or support a project that does. However, not all emissions are created equal. In the same way the ticket reselling market works, third parties can take a cut and sell them on, which means less money for the projects, and more carbon in the atmosphere.

At Fenix Carbon, we directly connect ethical companies with carbon reduction projects. We only deal with premium developers, and because you’re going direct, you can be sure that more of your money is going straight to the project to capture more carbon.

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