As organisations head towards beyond net-zero, COP26 in Glasgow delivered a “gift” that broke a six-year deadlock on article six of the Paris Agreement.
Negotiators agreed on the rules on global emissions trading and established a UN-controlled marketplace. The outcome is a new carbon credit programme that will run parallel with existing voluntary markets.
Carbon credit or “offset” means a unit of value to a reduction, avoidance or capture of greenhouse gases (GHGs) emissions achieved by a certified project. One unit of carbon credit is equivalent to one tonne of carbon dioxide equivalent (CO2e).
A carbon credit can be used by a business, organisation or individual to compensate their carbon footprint by financially rewarding an activity that has reduced or sequestered GHGs, and which also brings other sustainable development benefits.
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Companies having a climate strategy with the objective of emission reductions will need to consider the use of carbon credits as a means towards their beyond zero strategies. The value add to the offset schemes is that they also create other sustainable development benefits such as jobs or improved health, among many others.
Globally, demand for offsets is soaring and this is expected to have a ripple effect on our economies. According to BloombergNEF, more credits were traded in 2021 compared to 2020. This trend is expected to continue in the future considering that COP26 negotiation provided an enabling environment for the same.
