The Nature of Carbon Credits
A large and increasing number of companies and individuals who are not subject to mandatory emission caps are buying and selling carbon offsets voluntarily.
Their motivations can vary:
Corporate social responsibility is among the principal motivations for voluntary purchases. Buyers want to be good citizens. Some have to buy for regulatory reasons such as complying with the European ETS scheme. Whilst others hedge or insure to protect against sharp rises in future carbon prices.
For many individuals speculation and the profit potential is key. Evidence suggests that Governments, International bodies and academia, are engineering a tangible rise in carbon prices. The U.K. Government is even legislating a floor price for compliance credits.
A carbon credit is a financial instrument aimed at reducing GHG emissions. One carbon credit is equal to the reduction of one metric tonne of carbon dioxide or its equivalent in other GHG’S.
What is a carbon offset?
A carbon offset is a measurable prevention, reduction or sequestration of carbon dioxide (CO2) or other GHG emissions
Our carbon footprint is a measure of the imprint that our activities have on the environment and in particular climate change: activities such as driving to work and the shops requires burning fossil fuels. The carbon footprint is a measure of all greenhouse gases that are produced and is given in tonnes of carbon dioxide equivalent. The footprint can be primary, secondary, present and historic.
According to the Department of Energy and Climate Change, an organisation can be carbon neutral when through a transparent process of calculating emissions and offsetting residual emissions its net carbon emissions equal zero. The most successful companies are motivated to offset not just present emissions but historic or past emissions.