What are carbon credits and how are they used?

A carbon credit is a unit of measurement representing the avoidance or removal of one metric ton of greenhouse gasses from the atmosphere. Just like a dollar represents a unit of 100 cents. Like currency, carbon credits can be traded - or sold. 

But what can you trade with a carbon credit? Well, exactly that: you trade a carbon credit for the same amount (one metric ton) of carbon emissions that you have released into the atmosphere. So, let’s say you take a flight, this flight might release 2 tons of carbon emissions into the atmosphere. This is a major contributor to global warming - so not good. But, unless you have an alternative transport mode available, there currently isn’t much we can do about these emissions. So, you can make a choice to purchase 2 carbon credits (representing 2 tons) in order to fund climate projects that remove that same amount of carbon from the atmosphere or avoid it being released elsewhere. 

There are lots of types of climate projects, many of them have benefits beyond carbon, such as wildlife protection, fair labour and gender equality. Check out our series of ‘Types of carbon credits’ for more details’.

There are a few things important to remember: 

• There is a finite number of carbon credits available to trade (just as there is only a finite number of currency available)
• While international guidelines are being worked on to improve the standard and quality of all carbon credits, some credits are better quality than others. There are ways to determine which carbon credits are of high quality
• The reduction and avoidance of carbon emissions needs to be the priority for individuals, businesses and governments. So, if you don’t have to take that flight, don’t. Take the train instead. But the reality is that some emissions cannot yet be reduced, and some we may never be able to avoid entirely. So, carbon offsetting - which describes the action behind purchasing carbon credits - can be a powerful tool to add to our climate action toolbox 

The power of carbon offsetting for businesses

While everybody should be accountable for the impact they are having on the environment, businesses should be at the forefront of practising sustainability. Why? Well, not only is their impact in itself much higher compared to a single individual, but also do they have the power to influence their employees’ and customers’ behaviour. 

Those businesses committed to utilising as many tools as possible in order to slow down global warming, can support their emission reduction strategies (so, initiatives that stop carbon from being released in the first place) with high quality, credible carbon offsetting. 

Take a sporting organisation for example, that hosts a number of large scale events with a large crowd of spectators who are travelling far and wide to witness the event. There are lots of initiatives the organisation can do in order to reduce emissions. Such could include: improving energy and operational efficiencies, utilising renewable energy, or reducing waste. But unfortunately, some emissions cannot be reduced (mainly because technology hasn’t quite caught up yet). 

One major area for emissions that are hard to reduce is air travel. So, a sporting organisation could address air travel of spectators and teams by funding high quality climate projects that remove or avoid carbon emissions (also known as carbon offsetting). 

How can a business measure their carbon emissions, and how do reduction and offsetting fit together?

A business can (and in some cases must) measure their carbon emissions in 3 scopes, or categories:

• Scope 1: These are the emissions the business has direct control over. For an airline for example, this would be the fuel for their planes.
• Scope 2: Emissions that are indirectly caused by a business. This could be the energy that is purchased to power the business’s office buildings.
• Scope 3: This is by far the largest category and makes up about 75% of all business emissions. Scope 3 emissions are out of direct control for the business, as they include all emissions that are created up and down the value chain. This includes business travel, staff commuting, waste, distribution and many other categories. 

It is important to understand that one business’s scope 1 emissions are another business’s scope 3. Taking the airline example again, the fuel for the plane is counted as a scope 1 emission for the airline. A financial services company who has staff flying from A to B for business meetings has to accounts those flight emissions under scope 3. 

As highlighted above, reducing scope 1, scope 2 and scope 3 emissions must be the priority for all businesses. In line with any net-zero targets set with the Science Based Target Initiative (SBTi) it:
‘requires that companies set targets based on emission reductions through direct action within their own boundaries or their value chains.

The use of carbon credits must NOT be counted as emission reductions toward the progress of companies’ near- or long-term science-based targets. This means that companies cannot purchase carbon credits as a substitute for emission reductions.’

However, at CarbonClick we believe offsetting is a powerful tool to complement reduction efforts and address emissions that cannt be reduced or avoided entirely. 

Recently, the SBTi announced that residual scope 3 emissions can be reduced by purchasing carbon credits. The SBTi will refrain from any guidance on the quality of those and rely on ‘other entities are better positioned to deal with this activity’. 

Which brings us to our next point.

What to consider when choosing carbon credits

When evaluating carbon credits, make sure to do your homework. Unfortunately, there are some low quality credits out there which may not have the positive impact they promise. The good news is that there are more and more recognised standards and initiatives out there who set a benchmark for the quality of the credits, such as the Core Carbon Principles, CORSIA or ICROA.

In addition, you can choose to work with a carbon partner who follows a very strict selection process when it comes to sourcing carbon credits. So in simple words, a partner who does your homework for you. Working with a credible provider will support you and your business in making a meaningful positive impact and protect your brand from being accused of greenwashing.

That’s where CarbonClick comes in.

We believe that we all have a responsibility to reduce carbon emissions where we can — it’s the most effective form of climate action. Our job is to make sure carbon offsetting is there as a trusted and meaningful option in your toolbox for when you can’t reduce.

Integrity and transparency matter to us. A cooler planet can’t be achieved through half measures. That’s why every carbon offsetting project we support must offer total transparency and pass our 7-Point Impact Check.

Our framework builds on top of the world’s most highly regarded offsetting frameworks, including the Carbon Offset Guide, Core Carbon Principles, Carbon Market Watch’s CORSIA carbon offset provider assessment report, ICROA best practice, and the Oxford Offsetting Principles. These sources are considered to be the industry benchmark for carbon offsetting methodologies.

Every single project in our portfolio is certified by a reputable recognised registry, such as Gold Standard or Verra, so you can be sure of its credibility. On top of that, we evaluate each project against 7 key criteria:

• Additionality
• Accuracy (over-crediting)
• Permanence
• Perverse incentives
• Double counting
• Positive community impact
• Monitoring & evaluation

CarbonClick makes offsetting simple

At CarbonClick, we believe simplicity and accessibility will accelerate climate action. We make carbon offsetting easy to integrate into customer journeys and day-to-day business operations, so it’s a simple click, not a stumbling block. Our hand-picked project portfolio can help you balance cost-effectiveness with relevance to your audience.

Is there anything we can help you with? Please get in touch today.