The market of carbon offset must be scaled globally. If such a thing is done, we may make a sufficient dent in climate change. The latest report led by United Nations Special Envoy for Climate Action Mark Carney lays out the principle and recommendation for bolstering and regulating the carbon credit market on a global scale.
The market for voluntary offsets is an increasingly popular tool for companies trying to neutralize some of their climate-warming carbon emissions. In 2019, carbon credit trading was marked by unexpected liquidity in the California Carbon Allowance market. Therefore purchasing carbon credit is an effective way to transition to a low carbon, climate secure world.
Pricing Based on Dynamics
The voluntary carbon credit market today is driven by supply and demand. Moreover, the market is very effective for driving competition and reducing the cost of accomplishing an objective. Paying for carbon credit at prices below what it costs to maintain a project means that these projects may stop operating in the vulnerable communities they support.
Besides, neglecting to account for the actual value fully they deliver in beyond-carbon development benefits can accelerate the race to the bottom. This means the best quality project might be the first to fail.
Innovative Approaches from Companies
There is a growing awareness amongst private companies on the actual value of natural capital: this covers a stable climate and thriving ecosystem, development in social measures including improved health, and gender equality.
One such example is Microsoft; it requires their internal departments to include a budget line item reflecting the cost of their carbon emissions.
A carbon fee contributes to a carbon investment fund, creating new capital for sustainability initiatives.
The idea behind offsets is that a company can buy or trade “credit” worth one metric ton of carbon, depicting a portion of their emission that they’re trying to neutralize by carbon reduction somewhere else. The revenue will either go towards protecting a prescribed area of forest or towards an equivalent amount of carbon sequestered by carbon-capture technology.
The voluntary carbon credit market has come under security, especially the nature-based offset projects. In fact, in the early days, they failed to deliver their hoped-for climate impacts. Significant advancement has been made for effectiveness, yet there are unresolved issues related to structures and standards.
For businesses and companies looking for their carbon footprint, nature-based offsets represent immediate and effective ways for some high carbon-emitting industries (airlines, cement, manufacturers, and more) to cut emissions. Meanwhile, this includes continuing to reduce emissions elsewhere through their operations.
Deciding what project to invest in and how much it’s worth is a bit challenging. Numerous considerations are ranging from quality, type, size, and geographical location. At the same time, the market value remains somewhat subjective depending upon the ideals, objectives, and requirements; the prices of carbon credit closely monitor the social cost of carbon and the economic value provided in other impacts.