trade carbon credits
Carbon credit trading is a key tool for companies seeking to reduce their greenhouse gas emissions. These companies buy credits to offset the emissions from their operations or those of other businesses that have already cut their emissions. The idea is that each reduction in carbon emissions represents a credit worth one ton of CO2. The companies then use those credits to meet their climate targets or pass them onto other entities that have failed to reach their own goals.
A big problem with this scheme is that not all trade carbon credits are equal. In fact, many are so bad they don’t represent any reduction at all. They are the equivalent of lemons in a used car market — so-called bad carbon credits drive out good ones.
In an effort to solve this issue, some companies have created voluntary markets where they can purchase and sell carbon credits to each other. The companies that own the credits must verify that the projects that produced them are actually reducing carbon emissions. In addition, the buyers must ensure that the credits they buy are valid and meet their compliance requirements.
companies that trade carbon credits
To do so, they must make sure that the carbon credits have been independently verified by a recognized third party and that their data are secured through blockchain technology to prevent tampering. Some of the leading companies that are active in this space include Unilever, Disney, Google, Microsoft, Salesforce, and Vodafone. This group has formed the Business Alliance for Scaling Climate Solutions to improve the quality of carbon offsets in the market and get them into the hands of companies that need them.
The alliance’s blueprint calls for improving the standards and criteria that are used to evaluate carbon-reduction projects. It also recommends that all verified carbon credits be based on independent, validated, and monitored projects. In addition, the report urges that all data for verified carbon credits be stored on a blockchain, making them resistant to tampering and unalterable. These are significant steps toward creating a market where the integrity of carbon credits is paramount, but they are only the beginning.
A successful carbon-credit marketplace needs to be large, transparent, verifiable, and environmentally robust. It must also provide clear demand signals to drive liquidity and scaled-up supply.
One way to do this is by setting quality thresholds, such as core carbon principles and a common attribute taxonomy, to guide the verification process. Another way is by providing liquid reference contracts that will allow buyers and suppliers to trade credits in a more efficient way than the current over-the-counter transaction model.
Vida Carbon recently joined the International Emissions Trading Association (IETA), which is a global leader in carbon-offset projects and market development. As an IETA member, Vida Carbon is able to bring private financing to climate-action projects that would not otherwise be possible. These projects help to protect biodiversity, improve public health, and support innovation in lower-cost emerging technologies. This supports the IETA’s mission to leverage market forces to accelerate climate action and to promote a sustainable global economy.
