An introduction into Carbon Markets
Before we begin, lets break down the 2 words:
Carbon – when talking about carbon, we are usually referring to carbon dioxide equivalent or CO2e – this allows us to have a single unit of measurement even though there are multiple greenhouse gasses with different impacts. In carbon markets, a carbon unit is generally the equivalent of 1 tonne of CO2e (tCO2e) removed from the atmosphere, or avoided from entering it.
Carbon offsetting involves buying carbon credits and retiring them (each credit can only be used once), typically to offset emissions made elsewhere. While the preference should be given to reducing emissions made, in some cases it is not economically or technologically feasible to do so. This is where carbon offsetting comes in.
Some countries post a cap on the level of carbon that is allowed to be emitted by a certain company. In this compliance scheme, if the company ends up emitting more than it is permitted to, it should purchase carbon credits to offset their emissions.
In recent years there has been a surge in the number of companies, not yet bound by emissions compliance rules, that voluntarily pledge to participate in the net zero decarbonization journey.
The voluntary carbon market is now worth over $1 billion dollars, equating to the approximately without (Ecosystem Marketplace, August 21).
Who are the main participants in carbon markets?
Demand for carbon credits come from a range of government bodies, corporations and individual buyers. The units themselves are usually generated by projects that contribute to the avoidance, capture, removal or storage of carbon from the air.
Here are the 4 most common carbon credit generator project types:
- Forestry and conservation
Forestry projects are not the cheapest offset option, but they are often chosen for their many additional benefits outside of the carbon credits they offer.
- Renewable Energy
Renewable energy offsets help build or maintain primarily solar, wind or hydro sites across the world.
- Community projects
Community projects often help to introduce energy-efficient methods or technology to undeveloped communities around the world.
- Biomass projects
Biomass projects involve capturing methane and converting it into electricity. Sometimes this means capturing landfill gas, or in smaller villages, human or agricultural waste.
Carbon offset projects create more impact than just generating credits. They contribute towards the . These impacts, known as co-benefits, can range from increased biodiversity in a specific region to maintaining a habitat for indigenous species of plants or animals, as well as, creating employment, education and training opportunities for people working in these areas.
At Renewable Energy Hub, we aim to facilitate a sustainable and transparent carbon market by creating a marketplace on our CORE Markets platform. We aim to match the supply of carbon credits with the demand and investment opportunities to ensure that projects are being rewarded appropriately based on the co-benefits they deliver.
You can learn more about our CORE Markets platform here
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