As we know, human activities heavily pollute the environment, and a significant portion of global CO2 emissions can be attributed to transportation. In addition to the long-term climate protection plans of global organizations and influential corporations, small and medium-sized businesses also can reduce emissions. Fortunately, it is no longer limited to everyday techniques and methods that mitigate greenhouse gas emissions; we can actively offset emissions by trading certain units. In this article, we will discuss the difference, importance, and objectives of carbon quotas and carbon credits.
As we know, human activities heavily pollute the environment, and a significant portion of global CO2 emissions can be attributed to transportation. In addition to the long-term climate protection plans of global organizations and influential corporations, small and medium-sized businesses also can reduce emissions. Fortunately, it is no longer limited to everyday techniques and methods that mitigate greenhouse gas emissions; we can actively offset emissions by trading certain units. In this article, we will discuss the difference, importance, and objectives of carbon quotas and carbon credits.
So, what are these units? In the interest of climate protection, the European Union, the world's third-largest carbon dioxide emitter, has set the goal of significantly reducing emissions by 2030 compared to 1990 levels and reaching net-zero emissions by 2050. To facilitate this, the EU has established the ETS, the Emissions Trading System, which specifically targets the industrial sector, encompassing over 10,000 power plants and factories.
The ETS sets a quantitative limit on carbon dioxide emissions, and companies can only pollute below this limit by purchasing carbon dioxide quotas. These units are acquired through auctions, motivating companies to keep their emissions as low as possible through efficient purchasing. Each quota represents the authorization for emitting one ton of carbon dioxide. Due to their pricing, carbon quotas are predominantly accessible to participants in the corporate sector, but there are also purchasable units available for smaller industrial players.
Carbon credit is a permit or certificate that indicates that its owner, who voluntarily purchases the units, possesses 1 ton of CO2 not emitted, which entitles them to offset 1 ton of emitted CO2. This is because the project from which the carbon credit originates has reduced global greenhouse gas emissions by 1 ton. These projects must meet strict criteria to be eligible for carbon credit issuance after a certain period. A project can only qualify for carbon credit issuance if it cannot be realized without the revenue generated from credit utilization. These projects are audited by transparent international organizations, and the issuers of credits guarantee that the represented amount of CO2 has already been removed from the atmosphere.
Carbon credits are thus created through actual emissions reductions, by qualified projects that utilize renewable energy and have previously used fossil fuel sources or were specifically established for clean energy production. Thanks to the emergence of the market, responsibility in the form of carbon credits is now available not only to companies with significant emissions but also to individuals and small and medium-sized enterprises. When carbon credits are used for greening purposes, the proceeds, i.e., the price of the carbon credit, also support innovation related to the utilization of renewable energy sources.
Offsetting the greenhouse gas emissions caused by humanity is already happening, and through emissions trading, a process is currently underway that allows us to combat the destruction of our planet. Such investments are meant to ensure something much more important than a company’s SCR strategic move: securing the future of humanity.
