Opinions expressed by Entrepreneur contributors are their very own.
Across industries, firms are taking drastic measures to minimize their environmental footprint, from reducing carbon emissions to using recycled materials to minimizing business travel. Carbon offsetting has develop into a significant tactic for forward-thinking firms looking to significantly reduce their climate impact.
The voluntary carbon market is predicted to grow from $2 billion in 2020 $250 billion by 2050, demonstrating its enormous capability to deliver meaningful climate solutions.
Nonetheless, for the industry to realize its full potential, firms need clarity and transparency within the strategy of selecting carbon allowances. For firms looking to significantly reduce their carbon footprint, there will be fear and confusion about selecting the “right” credits – those that actually deliver the impact you pay for. Voluntary carbon markets lack clear standards, which generally is a challenge for firms wanting to do the fitting thing.
Related: Carbon Credit Market Could Grow 50-fold: How One Pioneering Platform Meets Demand
What are carbon credits?
It is extremely vital that firms make significant progress in reducing the carbon emissions they produce. Nonetheless, there’ll inevitably come a time when organizations will reduce their total emissions as much as possible. To bridge this carbon gap, firms depend on carbon credits — which mean the removal or conservation of carbon by others.
Corporations buy carbon credits from projects that absorb existing carbon trapped within the atmosphere and protect existing carbon stocks from being released, each of that are needed to reverse the climate crisis.
For instance, the crops of the world’s two billion small farmers naturally absorb carbon from the atmosphere and store it back within the soil. Using sensors, satellite imagery, artificial intelligence and regular monitoring, this stored carbon will be tracked and quantified after which sold as a carbon credit.
Most firms buy carbon credits through voluntary carbon markets, that are fast becoming an important tool to help firms meet their climate goals. While these carbon credits are a proven tool for offsetting emissions, there are lots of options that vary in quality and impact.
Why carbon credits?
Risk is the most important driver in business and — z trillions of dollars in annual climate-related costs and damages – the climate crisis is fast becoming a business crisis. Corporations must act now to minimize losses, display meaningful climate motion to shareholders, and comply with fast-approaching climate regulations.
Carbon credits are a very important approach to scaling climate motion globally and a fast-growing strategy to meet corporate ESG goals. While these offsets are a part of nearly every scenario that keeps global warming at 1.5 degrees Celsius, existing carbon markets lack widespread public confidence: effective carbon solutions require clear guidelines and proven, verifiable data.
Bringing transparency through data
When selecting carbon credits, consider the info:
- What kind of knowledge is provided – Is it clear Who is chargeable for carbon sequestration (i.e. small farmers) and How they do it (i.e. by growing their regenerative farms?
- How is carbon removal calculated?
- Who verifies the info – is it a 3rd party?
- Are carbon emissions auditable (especially vital for public firms in light of the SEC’s fast-approaching climate information disclosure rules)?
Corporations need auditable, transparent climate and social impact data to inform key stakeholders about their activities.
Without transparency about where carbon comes from, the positive and negative effects of carbon capture and storage, and the way it’s calculated, there is a big corporate risk to defective carbon credits.
Investors should turn to carbon credits that allow them to trace the origin of their credits back to the precise farm and community they arrive from, and that reliably quantify how these communities profit from carbon markets.
Climate justice: combining social and environmental impact
While carbon markets to date have rarely focused on socio-economic impacts, the evolving generation of carbon markets will prioritize each social and environmental impacts of their models. In practice, these carbon credits will profit the environment while equitably compensating those chargeable for carbon sequestration. Often these carbon stewards are amongst probably the most vulnerable populations – including smallholder farmers, women and indigenous communities.
When buying carbon credits, ensure that carbon stewards are paid fairly by asking some basic questions to those selling carbon credits:
- In what language do they discuss partnership with coal managers?
- Are their data audited?
- Has the financial model for carbon credits been revealed? Are coal managers remunerated fairly and on time?
- Is data on socio-economic improvement made available to investors in accordance with accepted third-party standards?
Considering the social and environmental impact of next-generation carbon markets can further add value, potentially benefiting vulnerable communities that play a key role in carbon sequestration. A well-designed carbon credit protocol can provide a financial incentive for coal managers to support their future work – increasing the positive socio-economic and environmental impact for future generations.
Other Carbon Removal Tactics
Mechanical carbon capture takes the shape of enormous machines that effectively suck carbon dioxide out of the air for storage, placing it underground or otherwise repurposing it. While mechanical carbon capture shows promise, the technology is basically still in its infancy, is incredibly expensive, and remains to be proving to be scalable.
Related: Blockchain may help us fight climate change – here’s how.
The time is now
The forecasts already show that the planet will reach the edge of 1.5 ° C in global temperature change by 2027, which is able to occur much faster than ever expected and with potential damage, lack of life and trillions of dollars in damage to the worldwide economy.
That is the moment when all hands on deck. We must use proven, reliable and fair methods to tackle what would be the best threat to the long run of humanity and the planet we inhabit. Carbon credits, if implemented responsibly and on a big scale, generally is a very effective tool that humanity can use within the fight to limit the damage brought on by climate change. Nonetheless, industry growth is dependent upon increased transparency and standardization to ensure that carbon credits actually deliver the promised impact.