What Is Carbon Credit?

A carbon credit is a permit that allows the holder to emit greenhouse gases. Each credit allows a certain amount of carbon dioxide or other greenhouse gases to be emitted, and each credit is usually equivalent to one ton of carbon dioxide. The permit has value and can be traded.

Carbon credits came about as a way for the world to mitigate the emissions of greenhouse gases. By capping greenhouse gas emissions and trading them, market mechanisms will encourage the world’s economic engines to contribute their mighty power to the effort of reducing emissions of industrial and commercial processes and employing less carbon-intenive approaches. Projects and efforts that reduce greenhouse gas emissions generate credits that will help finance further carbon reductions.

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Carbon Credit Trading

Some businesses and NGOs benefit from carbon trading by planting trees or otherwise committing to and documenting efforts that reduce atmospheric carbon. These entities can then sell or otherwise transfer their carbon credits to companies that create GHG emissions in their business, whether they’re oil companies that produce a product that emits carbon when it’s used, or companies such as airlines or freight haulers that emit carbon in the course of conducting business day to day. Construction companies employing concrete, meat producers raising and transporting beef cattle to market, steel fabricators constructing and transporting large bridge components, a mom and pop grocery store importing produce and using refrigeration and lighting from a coal-fired power grid, virtually any business you can think of has a carbon footprint that could be offset by carbon credits.

Certified emissions reduction (CER) create emission units (or credits) through a regulatory framework to offset a project’s emissions.

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What Is Carbon Credit Trading?

Buyers and sellers can also trade carbon credits on an exchange platform to trade, similar to a stock exchange for carbon credits. Here’s where the power of economics has the potential to drive the market. Not all credits are created equal. The quality of a carbon credit is based in part on the validation process and the sophistication of the method used to assign the value to the credit. Like any exchange, not every share or credit is assigned a uniform value. Instead, some credits will be more desirable, due to the effect they have on removing carbon from the cycle and sequestering it in the soil, but also how rigorously they are validated.

This is where Verity Tracking comes in, because sustainability must rely on measurable facts. It’s important to use an apples-to-apples comparison to understand sustainability. We need to look at the entire life cycle from the source of the carbon in the feedstocks to the carbon added and taken away by energy used in various processes. We need to count carbon to measure GHG reduction, and attach a carbon-reduction value to every gallon of fuel produced.

While the metric of carbon is most important for reducing GHG, there needs to be a value attached to the reduction of GHG. But measuring GHGs alone is insufficient from a sustainability point of view. Here’s why:

• If a raw material contributes protein to the food chain, it should be more favored, although markets generally sort it out.

• Land use should be measured and incorporated. Potential deleterious impacts need to be taken into account, including biodiversity effects, water affects, etc.

• Putting a specific value to some sustainability metrics is not simple.

Think about trying to put a numerical value on the effects lower-carbon jet fuel production could have on ocean biodiversity, one must think about all the possibilities, such as an oil spill, then you’d have to assign a value to each of them. When a metric can be manipulated to create apples-to-oranges comparisons, everyone loses.

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