Government regulations once led to carbon markets that aimed to meet minimum standards. The corporate world is now holding itself to higher standards and pushing for the development of a voluntary carbon market. Major companies are now some of the biggest drivers of environmental improvement initiatives. Here, financial markets expert Eddie Listorti provides an overview of the voluntary carbon market and its role in limiting global warming.
How Carbon Offsets Combat Climate Change
Carbon offsets help to fight against climate change in two primary ways. First, carbon offsets provide an opportunity for companies to promote decarbonization rather than contributing to the release of carbon into the atmosphere. Secondly, the programs that these companies fund with the offsets can work to remove carbon dioxide from our atmosphere.
Each carbon credit represents one ton of carbon dioxide. Buying a carbon credit means that companies prevent the release of that carbon or remove it from the atmosphere. Projects that can sell such credits need to meet these standards:
- Achieving real, avoidance, removal or reductions;
- Providing measurable results;
- Improvements must be additional and cannot be achieved without the investment;
- The results should be verifiable by independent reviews.
There are standards for these programs. Organizations can certify a project so that the companies that purchase carbon credits can feel confident that their investment will have a genuine impact.
By purchasing carbon credits, companies can fund programs that will have lasting effects on the climate. For example, qualifying projects might include:
- Development of renewable energy;
- Avoid deforestation and degradation;
- Reforestation efforts;
- Prevention of methane emissions from wastewater sites and landfills
- Fund regenerative farming initiatives
Many other projects might qualify, but these are some of the most common examples.
Carbon Targets and Limits on Reductions
Carbon emission reduction will depend on several factors, including technological feasibility. Companies can create targets that include an overall negative carbon emission rate, even though they cannot entirely eliminate all of their own forms of emissions, especially if the technology is not advanced enough in their area to achieve such goals.
Instead of just maximizing their own reductions, corporations can give financing to offset their emissions and make their net impact on total emissions negative. As technology improves and researchers develop more sustainable energy sources, businesses will have additional ways to reduce their carbon output and cut down on other sources of greenhouse gases.
Carbon Offsets Create Short-Term and Long-Term Improvements
The most effective method for reducing greenhouse gasses is to avoid adding more emissions into the atmosphere. Carbon credit systems can help with this short-term goal. Not only will the investment reduce emissions, but it will also help to build the market for efficient and renewable energy.
Long-term improvements include scaling up removal techniques and efforts. The ability to neutralize emissions will be necessary to meet a net-zero emission score. Reforestation efforts and improved soil and farming activities will help with this objective, as will new technology that is designed to capture carbon.
Companies Are Striving for Carbon Negativity
Microsoft is one of the prominent corporations that created a lofty carbon-negative goal for itself. IKEA and other large businesses are also taking these steps and committing themselves to improve the environment. Growing the market for carbon offsets is one part of a necessary plan to battle climate change.
About Eddie Listorti
Eddie Listorti is a distinguished professional with 25 years of experience in business and banking. His track record includes managing annual revenues of AUD 2 billion and teams of 2,000 staff members across management positions in financial markets. Mr. Listorti’s experience includes risk management, identifying value and opportunities, and building and managing successful teams. Carbon trading is one of Mr. Listorti’s areas of expertise.