FOUNDATION FOR ADVANCING RENEWABLE ACTIONS AND DECISIONS
CARBON OFFSETS and CREDITS
As a general explanation, a carbon offset is a reduction or removal of emissions of carbon dioxide or other greenhouse gases made in order to compensate for emissions made elsewhere. A carbon credit or offset credit is a transferable financial instrument ( such as a derivative of an underlying commodity ) certified by governments or independent certification bodies to represent an emission reduction that can then be bought or sold.
Both offsets and credits are measured in tonnes of carbon dioxide-equivalent (Co2e). One carbon offset or credit represents the reduction or removal of one ton of carbon dioxide or its equivalent in other greenhouse gases.
Carbon credits are a component of national and international attempts to mitigate the growth in concentrations of greenhouse gases (GHGs). In these programs, greenhouse gas emissions are capped and then markets are used to allocate the emissions among the group of regulated sources. The goal is to allow markets to drive these sources towards lower GHG emissions.
A variety of greenhouse gas reduction projects can be used to create offsets and credits. While forestry projects are a fast growing category, renewable energy is rapidly trending such as solar energy, wind farms and the new revolutionary Positron Magnetics particle acceleration technology which creates zero carbon footprint electricity.
Origins of the carbon market
The 1977 US Clean Air Act created one of the first tradable emission offset mechanisms. This allowed a permitted facility to increase its emissions if it paid another company to reduce, by a greater amount, its emissions of the same pollutant at one or more of its facilities. The 1990 amendments to that same law established the Acid Rain Trading Program. This introduced the concept of a cap and trade system, where limits on a pollutant would decrease over time. Within those overall limits, companies could buy and sell offsets created by other companies that invested in emission reduction projects.
In 1997 the Clean Development Mechanism was created as part of the Kyoto Protocol. This program expanded the concept of emissions trading to a global scale, and focused on the major greenhouse gases that cause climate change. These include: carbon dioxide (CO2), methane, nitrous oxide (N2O), perfluorocarbons, hydrofluorocarbons, and sulfur hexafluoride.
HOW TO PRODUCE CARBON OFFSETS
The Farad Connect Meter
Energy Efficiency Improvements
Renewable Energy Projects
The Farad Connect Meter measures and authenticates electricity produced by net zero emission renewable energy systems. This puts the carbon offset market within reach of the everyday consumer wanting to contribute to a cleaner and greener environment. Both consumers and industry can deploy renewable energy, producing clean electricity not sourced from the burning of fossil fuels. In the process of using clean renewable energy they create Farad Tokens, unique patented digital secure vouchers, which can be used as verified carbon offsets.
Renewable Energy Projects
Energy Efficiency Improvements
Renewable Energy Projects
Renewable energy projects have already existed long before carbon credit markets came into vogue. Many countries in the world are blessed with a natural wealth of renewable energy resources. Countries such as Brazil or Canada that have many lakes and rivers, or nations like Denmark and Germany with lots of windy regions. For countries like these, renewable energy was already an attractive and low-cost source of power generation, and they now provide the added benefit of carbon offset creation.
Energy Efficiency Improvements
Energy Efficiency Improvements
Energy Efficiency Improvements
Energy efficiency improvements complement renewable energy projects by reducing the energy demands of current buildings and infrastructure. Even simple everyday changes like swapping your household lights from incandescent bulbs to LED ones can benefit the environment by reducing power consumption. On a larger scale, this can involve things like renovating buildings or optimizing industrial processes to make them more efficient, or distributing more efficient appliances to the needy.
Carbon and Methane Capture
Carbon and Methane Capture
Energy Efficiency Improvements
Carbon and methane capture involves implementing practices that remove CO2 and methane (which is over 20 times more harmful to the environment than CO2) from the atmosphere.
Methane is simpler to deal with, as it can simply be burned off to create CO2. While this sounds counterproductive at first, since methane is over 20 times more harmful to the atmosphere than CO2, converting one molecule of methane to one molecule of CO2 through combustion still reduces net emissions by more than 95%.
For carbon, capture often happens directly at the source, such as from chemical plants or power plants. While the injection of this captured carbon underground has been used for various purposes like enhanced oil recovery for decades already, the idea of storing this carbon long-term, treating it much like nuclear waste, is a newer concept.
Land Use and Reforestation
Carbon and Methane Capture
Land Use and Reforestation
Land use and reforestation projects use Mother Nature’s carbon sinks, the trees and soil, to absorb carbon from the atmosphere. This includes protecting and restoring old forests, creating new forests, and soil management.
Plants convert CO2 from the atmosphere into organic matter through photosynthesis, which eventually ends up in the ground as dead plant matter. Once absorbed, the CO2 enriched soil helps restore the soil’s natural qualities – enhancing crop production while reducing pollution.
Voluntary vs Compulsory
Carbon and Methane Capture
Land Use and Reforestation
Voluntary vs Compulsory: The biggest difference between credits and offsets
Participation in a cap-and-trade program typically isn’t voluntary. Your company either needs to abide by carbon credit limits set by regulators, or no such limits exist. As more and more countries adopt cap-and-trade programs, companies increasingly need to participate in carbon credit programs.
Carbon credits intentionally add an extra onus to businesses. In return, the best cap-and-trade programs provide a clear framework for reducing carbon emissions. Not all programs are created equal, of course, but at their best, carbon credits have a clear impact on total carbon emissions.
In contrast, carbon offsets are a voluntary market.
There’s no regulation that mandates companies to purchase carbon offsets. Doing so is going above and beyond, particularly for companies operating where cap-and-trade programs don’t exist yet. Precisely for that reason, offsets provide a few advantages that credits simply don’t.
The Wild West of Carbon Credits
Making sense of the chaos
Technically speaking, carbon credits are government-issued carbon allowances. Under the right conditions, they can be bought and sold in different exchanges. But participation is limited to entities (typically companies) in areas with an Emissions Trading Scheme (ETS). In the US, only California has a state-administered carbon trading program.
That leaves a growing demand for companies to take responsibility for their greenhouse gas emissions, but no formal market to meet that demand.
That’s where the idea of carbon offsets comes in.
Using the right tool for the right job
Carbon offsets are environmental commodities traded on a voluntary market. By investing in carbon reductions projects, companies can “offset” the carbon they produce.
Offsets don’t fall under existing government regulation. They’re an entirely natural market response to a new demand. But that does raise an important question: who verifies carbon credits?
Without a government regulator, the market is left to sort out its own verification activities. In a new and growing market, that means a lot of uncertainty, but also an immense opportunity for any entity who can provide an unprecedented verification and validation for carbon offsets.
