What to Consider When Buying Voluntary Carbon Credits
Now is the time for companies to set climate targets. While many organizations are working to reduce their emissions, some may not be able to make all the reductions they want cost-effectively. Luckily, there are other means available to reduce carbon emissions. Carbon credits, also known as carbon offsets, help businesses reduce emissions and positively impact the world.
Selecting the right voluntary credits for your organization to purchase may seem complex and daunting, but that’s why we’re here. Below are the factors to consider when buying voluntary carbon credits.
Carbon Credits as Part of an ESG Strategy
The starting point for any carbon credit purchase is planning a companywide ESG strategy (Environmental, Social, and Governance). The “environmental” component is critical to identifying your emission targets and the broader positive impact you plan to have on the world. Once you know the goal, you can plan how to optimally pair emission reductions from your operations with credit purchases to achieve it.
What Kind of Projects Provide Carbon Credits?
Every credit purchased represents one tonne of CO2 equivalent prevented from entering the atmosphere or removed altogether. These credits are created from projects around the world.
The main project categories are:
Renewable Energy Generation: the use of energy technology (solar, wind, or geothermal power) to decrease fossil fuel emissions
Nature-Based Solutions: ecological initiatives like tree planting or conservation efforts that absorb carbon from the atmosphere
Waste Management: the recycling and reuse of materials for future needs or additional energy generation
Industrial Processes: installing better, more efficient technologies to curb CO2e emissions directly
Depending on your organization’s needs and goals, you should choose the project(s) that most aligns with your values and brand story.
Benefits When Buying Carbon Credits
Emissions reduction is the primary function of a credit purchase, but there are other secondary benefits as well. The secondary benefits of the process create positive effects that often loop back to your ESG strategy. By purchasing carbon credits, you can often help struggling or growing communities:
Reduce poverty and hunger
Access affordable and clean energy
Achieve better education, gender equality, and overall health
Capitalize on economic opportunities
Preserve biodiversity in their area
Plan for a more sustainable future
These investments can become self-sustaining positive feedback loops, where economic prosperity and climate responsibility work hand-in-hand.
Scope, Vintage, and Standard of Carbon Credits
Once you have narrowed down your desired project area and secondary benefits, the next considerations are:
The scale (or scope) of projects, and therefore credits, can vary from small communities to entire regions or nations. You should choose a project that delivers for your ESG strategy.
Age of credits
Credits represent a verified reduction that happened in the past at a specific time, so each credit is tied to an impact in the past. Projects issue credits at different intervals, often yearly, leading to credits of differing vintages being available on the market. It is like wine, coins, or whiskey, except older credits are often more cost-effective than an equivalent credit tied to a more recent reduction.
Various standards around the globe verify projects to provide structure, guidance, specifications, and monitoring to ensure integrity. There are different standards and certifications, such as Verified Carbon Standard (VCS/Verra) or American Carbon Registry (ACR). It is essential only to purchase credits verified by a credible standard.
The Price of Carbon Credits
While all credits represent one tonne of CO2e, not all are priced equally. A variety of factors determines their final value: the type and total development costs of the project they originate from, their standard and vintage, as well as their originating location and co-benefits. In the end, it all comes down to supply and demand, because credits are not pure commodity products. They are unique, and a host of interconnected influences determines their value.
When selecting a counterparty for trading in carbon markets, our experience and capacity to meet financial and contractual obligations put us a cut above for a successful carbon credit purchase. We even blend “baskets” of offsets to meet our clients’ budgetary, ESG, and brand-alignment needs to deliver the best possible pricing on coveted credits. Our experience with global carbon markets and transactions will net more than great value – we also protect your legal and commercial interests and mitigate risk in the process.
Our team can ensure you participate in carbon markets with confidence and that your investment delivers on your ESG strategy.
To find out more about carbon credit buying and how Radicle can help you achieve your ESG goals and enhance business operations, reach out.