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Why Buy Carbon Credits?

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Want to purchase carbon credits to reduce your carbon footprint but not sure how to do this? This article will walk you through the buying process for carbon credits.

As the world shifts to Net Zero, more and more businesses are offsets their carbon footprints, investing in sustainable projects across the globe. What exactly is offset work and what are your options for carbon offsets?

What is carbon offset through purchasing carbon credits?

Carbon offset refers to the process of buying carbon credits from the carbon market, which is generated through CO2 absorption projects to offset an individual or business’s carbon emissions. The first step is to calculate how much carbon emissions are generated by your business. For instance, if a business has produced 1,000 tons in greenhouse gas (GHG) during the course of a year. To reduce the carbon footprint, it would require the purchase of 1000 carbon credits each one representing 1 ton CO2-equivalent. This accounting system is a easy way to make sure that the earth doesn’t produce more than it is able to absorb in addition to providing the much-needed funds for projects to reduce carbon emissions.

After you’ve identified your carbon footprint and have implemented measures like changing to clean energy, or reducing the consumption of electricity to lower the amount, it’s now time to offset any remaining carbon emissions by buying carbon credits. What are “good” carbon credits? Or are they bad ones?

There are many ways to trade carbon credits.

There are many ways to purchase carbon credits in order to reduce your carbon footprint.

Purchase carbon credits direct from the developers

The easiest way to buy them is from the point of origin: with the company that is accountable for the project that you wish to help. In this instance the company could invest in the advancement of the project, with the assurance of a reward in the form future carbon credits or what are known as Emission Reduced Purchase Agreements (ERPAs) which are a prepayment for carbon credits that are given at the time they are created. This option is more prevalent when the project is in the later stages of development.

There are two advantages of purchasing carbon credits from your developer of your project:

It allows you to gain greater knowledge of the project and be involved in its management
You can get lower prices that you would get from the reseller

However, this isn’t an option for everyone.

it takes some amount of research and expertise to find the most the most suitable projects. It requires a certain amount of research and knowledge to identify suitable
the carbon credits aren’t immediately available when you purchase these credits.

Buy carbon credits from an intermediary

Many project developers partner with brokers to organize the purchase for their carbon credits. In this instance your company will contact an agent and provide them with details about the kind of project you’re interested in (location prices, location, etc.). The broker will find an opportunity that you like and then purchase carbon credits on behalf of your company and sell them to you at a profit.

This is more sensible than directly dealing with a particular project, particularly when you require a large amount of carbon offsets. Because it’s an intermediary the broker manages every transaction.

However, there are some major negatives to be considered:

Brokers aren’t very forthcoming about their pricing structure, which means there is no way to know what the cost of the carbon credit and the broker’s fees
In some instances brokers can charge businesses nearly three times what they pay developers of projects and thereby utilizing their power as middlemen and destroying the objective of climate finance.

The Financial Times recently exposed just how the opaque carbon credit brokerages’ business practices could be. This isn’t a choice we would recommend.