November 7, 2024.3 minutes

What is a carbon credit?

What is a carbon credit?

A carbon credit is a certificate representing the reduction, avoidance, or removal of one tonne of CO2-equivalent greenhouse gases. These credits are tradable on carbon markets, enabling businesses and individuals to mitigate their climate impact. But what is a carbon credit really, and how does it contribute to climate change mitigation?

How does a carbon credit work?

A carbon credit is essentially a tool used to finance climate action by rewarding activities that reduce or remove GHGs from the atmosphere. Carbon credits are generated by projects that reduce emissions or sequester carbon, such as afforestation, soil carbon sequestration, or Direct Air Capture. Companies can then purchase carbon credits to compensate for their unavoidable emissions, helping them achieve net zero goals.

How much profit can be generated from a carbon credit? Healthy soil, thriving farms—turning regenerative practices into financial gains while building a sustainable future for farmers.

Types of carbon credits

There are two main types of carbon credits, both of which aim to reduce the amount of CO2 in the atmosphere:

Nature-based solutions

Nature-based carbon credits come from projects that use natural processes like photosynthesis or carbon sequestration in soil to reduce or capture carbon. Common examples include:

Afforestation and reforestation: Planting trees to absorb CO2.
Soil carbon sequestration: Improving soil health to trap more carbon.
Blue carbon: Protecting and restoring mangroves and coastal ecosystems that store carbon.

Technology-based solutions

Technology-based carbon credits are generated by engineered processes that capture or reduce carbon emissions. Examples include:

Direct Air Capture (DAC): Technology that captures CO2 directly from the atmosphere.
Biochar: A form of carbon capture where biomass is converted into charcoal, which is then stored in soil.
CO2 mineralisation: A process that captures and converts CO2 into solid minerals.

What determines the price of

a carbon credit?

The price of a carbon credit is influenced by several factors including:

Quality of credits: High-integrity and higher-quality credits are of higher value than those with less rigorous measurement and verification.
Adherence to standards: Aligning with international standards like ISO and Verra’s Verified Carbon Standard increases the value of carbon credits.
Co-benefits: Projects that offer additional environmental and social benefits, such as improving biodiversity or supporting rural communities, often command higher prices.

Learn more about how carbon credits are priced.

What is a carbon credit? This farm demonstrates how sustainable practices and modern machinery can turn environmental efforts into financial gains.

The AgreenaCarbon programme and carbon credit generation

A good option for generating carbon credits is the AgreenaCarbon Programme. Focused on soil carbon credits, this initiative helps farmers transition to more regenerative farming practices by turning GHG reductions and CO2 removals into verified, tradable credits.

Agreena offers farmers:

Rigorous quality assurance: Agreena uses a combination of field data, satellite imagery, and soil carbon modelling to ensure the highest integrity of its carbon credits.
World-class standards: The programme is aligned with globally recognised standards like ISO, Verra, and the IPCC guidelines, ensuring transparency and traceability.
Assured co-benefits: Beyond carbon reductions, AgreenaCarbon promotes soil health, biodiversity, and sustainable food production.

Find out more about the AgreenaCarbon Programme.

What is the future of carbon credits?

A carbon credit represents a tangible step toward mitigating climate change by providing financial incentives for projects that reduce or remove CO2 from the atmosphere. Whether through nature-based or technology-based solutions, carbon credits are a critical tool in the transition to a net-zero future. With programmes like AgreenaCarbon, farmers can contribute to climate action while benefiting financially from their sustainable practices.

Want to get involved in carbon markets? Learn how to start generating carbon credits with Agreena.