What makes a good Carbon Credit?

Purchasing high quality carbon credits is an effective way to contribute the transition to a low-carbon, climate secure world. However it can seem complex – especially answering what seems to be a simple question, "How much should I pay for a carbon credit?" Why is one carbon credit more expensive than another? Doesn't every carbon credit represent one tonne of carbon dioxide prevented from entering the atmosphere?

Considering the urgency of the climate crisis, all carbon offsetting projects are ‘good’ at this time. One way or another, they allow people and companies to measure and mitigate their climate impact, and they direct financing flows towards projects that work every day to preserve the planet.

That being said, the lack of standardization in this space means that it’s not always clear what to look for when choosing carbon credits, or how to measure the impact of projects that generate them. As a result, some carbon offsets need more scrutiny to really understand if it’s a good projects. Broadly there are three parameters which shape a “Good” Carbon Credit

• Additionality - Gold Standard defines additionality “as a question of whether an activity that reduces emissions would have occurred in the absence of the incentive created by carbon finance – by the value given to emission reductions through their representation as carbon credits (…) that can be traded and used by other entities”. In other words, would the projects happen without the financing provided by carbon offsetting. A number of projects seen in markets can be “Greenwashing” as argument can be made that it would have happened anyway – one key example is Solar which is cheaper in many countries now than it used to be and therefore should be first choice anyway.

• Broad Impact – Good Carbon Credits have broader impact than just lowering carbon emissions. For instance, what are the benefits of the project for biodiversity, or for the local community? One way to measure this impact is via the Sustainable Development Goals (SDGs).

• Traceability – Good Carbon Credits are transparent and use technology such as Blockchain to bring transparency to the project to ensure that money was actually spent on the project and benefits provided.

In conclusion, deciding on what Carbon Credits to invest in and how much it’s worth remains a bit like navigating the real estate market. There are a number of different considerations ranging from quality, type, size, and geographical location and broader things like impact, additionality and traceability. While “good” can remain somewhat subjective depending on your organization’s ideals, objectives and requirements, purchasing Carbon Credit does remain a very viable option for organizations seeking to become Net Zero.

‍