October 30, 2024.4 minutes

Carbon credits: A crucial tool for climate action and sustainable development

Introduction to carbon credits

As the world intensifies efforts to combat climate change, carbon credits have emerged as a key mechanism in global climate strategy. These tradable certificates allow companies, governments, and individuals to offset their unavoidable carbon emissions by investing in projects that reduce or remove greenhouse gases from the atmosphere. Carbon credits can not only help in mitigating climate change, but also support sustainable development by funding positive environmental and community projects. Learn more about how carbon credits work and their significance from McKinsey & Company’s report on scaling voluntary carbon markets (Noble Research Institute).

The importance of carbon credits in climate strategy

Carbon credits offer a bridge between environmental responsibility and economic opportunity, encouraging businesses and individuals alike to invest in projects that regenerate ecosystems and support sustainable development. Carbon credits play a critical role in both compliance and voluntary carbon markets. They provide a flexible mechanism for companies and countries to meet their climate targets and contribute to global climate goals. As the urgency to reduce greenhouse gas emissions grows, the demand for high-quality carbon credits is expected to increase significantly, driving the expansion of carbon markets worldwide. The World Economic Forum provides insights into the growing demand for carbon credits and their role in achieving climate targets.

How carbon credits work

A carbon credit represents the reduction or removal of one tonne of carbon dioxide equivalent (CO2) from the atmosphere. These credits are generated by projects that reduce or remove emissions, such as renewable energy installations, reforestation, and carbon farming initiatives. Once verified, these credits can be traded on carbon markets, where companies purchase them to compensate for their emissions and meet regulatory or voluntary commitments. The Environmental Defense Fund offers a detailed explanation of carbon markets and how carbon credits are generated and traded. It’s important to mention that scientific advances and technological solutions play a critical role in accurately tracking carbon reductions, ensuring transparency, and maintaining the integrity of the credits generated.

Types of carbon credits

Reduction carbon credits

These are generated by projects that reduce emissions at the source, such as energy efficiency improvements or transitioning to renewable energy. For more information on the types of carbon credits and their impact, visit Verra’s VCS Program.

Removal carbon credits

These credits are generated by projects that remove carbon dioxide from the atmosphere and store it, for example through afforestation, reforestation, and soil carbon sequestration.

The benefits of carbon credits

Environmental impact

Carbon credits help finance projects that directly reduce or remove greenhouse gases from the atmosphere, contributing to global efforts to mitigate climate change. The World Bank provides a comprehensive overview of how carbon credits support environmental sustainability.

Economic incentives

The sale of carbon credits provides a financial incentive for companies to invest in sustainable practices and mitigate future climate-related financial risks.

Corporate social responsibility

By purchasing carbon credits, companies can demonstrate their commitment to sustainability, enhance their brand image, and support public environmental claims.

Helical office rooftop with a view — Sustainable property company Helical is investing in Agreena’s carbon credits

Who buys carbon credits?

The demand for carbon credits comes from a wide range of industries, particularly those with hard-to-abate emissions. Companies like Helical, a leading real estate investment and development firm, are prime examples of carbon credit buyers. Helical has integrated carbon credits into its sustainability strategy to compensate for the hard-to-abate carbon emissions from its operations. By partnering with Agreena, Helical has purchased high-quality carbon credits generated by regenerative farming practices. This partnership not only supports global climate goals but also aligns with Helical’s commitment to sustainability and corporate social responsibility. Companies like Helical recognise the value of carbon credits in enhancing their environmental credibility and meeting stakeholder expectations.

Agreena’s carbon credit initiative

Agreena’s innovative solutions support both farmers and businesses on their sustainability journeys. By focusing on empowering people—both farmers and businesses—Agreena ensures that participants in the regenerative movement gain the tools, resources, and financial benefits they need to succeed. Through the AgreenaCarbon programme, farmers can generate verified carbon credits by adopting regenerative farming practices. These credits can then be sold on the voluntary carbon market, providing farmers with an additional income stream while helping companies compensate for their unavoidable emissions. Agreena’s commitment to transparency and integrity ensures that the nature-based carbon credits it offers are of the highest quality, contributing to real and measurable climate impact.

Conclusion: The future of carbon credits

As the world moves towards a low-carbon economy, carbon credits will play an increasingly important role in global climate strategy. By providing a flexible and market-driven approach to reducing and removing emissions, carbon credits support the transition to a sustainable future. With the growth of carbon markets and the increasing demand for high-quality credits - especially nature-based credits, the future of carbon credits looks promising.