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Carbon Credits, Explained

With climate conversations becoming more commonplace and their tone more urgent, certain jargon inevitably finds its way into the public ear. And while studies have shown that the use of jargon often causes people to disengage from pressing issues like climate change, certain words just seem to stick.


Take, for example, the snappy and alliterative term, ‘carbon credit.’ Perhaps it brings to mind the concept of ‘debits and credits,’ a fundamental accounting principle. Or, maybe it prompts you to draw connections to a creditor in the financial sense. If this is the case, you would be partially correct; carbon credits fit into a larger climate-related accounting system of sorts. If this has only confused you further, allow me to redeem myself.


At this point in the pandemic where we find ourselves questioning the construct of time itself, a healthy dose of escapism seems well in order. Let’s say you, a climate-conscious citizen, are planning a (theoretical!) trip to Spain where you will traverse the Camino de Santiago. It’s been a dream of yours for as long as you can remember, but you are keenly aware of the environmental impact associated with flying.


But this is supposed to be an escapist meditation! Yes, I know. It should be known, though, that being a good environmental steward does not demand perfection in all that we do, nor does it require us to sacrifice our dreams. Unless you’re an aspiring coal baron, in which, in that case, the planet would kindly ask you to consider a career in solar or wind.


Anyways, to make up for the emissions associated with your flight, you choose to go online, input your travel miles, and then pay a fee proportional to your personal emissions. This, in turn, will ‘neutralize’ the environmental burden of your excursion. How? Well, the flight from Newark to Barcelona is approximately 7,512 miles round trip and equates to 0.93 tons of carbon dioxide entering the atmosphere. This translates into a fee of $9.30 which will help fund projects actively working to reduce carbon emissions.


Just as you can make up for or ‘offset’ your personal carbon emissions, corporations can do the same. Once a company has done all that it can to reduce emissions internally, they may look to purchase credits to offset remaining emissions. Companies may search a marketplace to fund carbon emission mitigation projects that may look to distribute efficient cookstoves or establish wind farms, among others. While this sounds all well and good, the impact of these projects must be backed by rigorous accounting and validation mechanisms.


To differentiate genuine offset projects from less honest ones, there are four factors to keep in mind. First, the project must set forth a new contribution, meaning that it cannot be tacked onto a project already underway. This is the principle of additionality. Likewise, the project must be verified by a third party and its progress must be overseen in perpetuity, implying that it must also be permanent. By extension of the project’s permanence, it must both continue to offset emissions and prevent leakage, or the worsening of other socio-environmental issues.


Projects that meet these criteria have the potential to deliver the benefit of carbon offsets, which could be especially helpful in areas like the industrial sector that have long struggled to decarbonize. With that said, they must not become a crutch. The climate crisis demands an array of solutions and a commitment to continuous improvement. Certainly carbon credits can play a valuable role in mitigation strategies, but they cannot bethe entirety of our mitigation strategy.

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