Carbon credits are an important tool in fighting climate change. But, some people wonder if they're just a way for companies to seem "green" without actually making changes. This article looks into what carbon credits really do and if they are just "greenwashing."

Understanding carbon credits

Carbon credits are a tool that allows projects that reduce carbon global emissions to fund their activities. Every carbon credit is equal to one tonne of balanced-out emissions and can be sold to businesses to offset their yearly carbon emissions. This means money goes from companies that pollute to ones that help undo the effects of this pollution.

But, this system has raised a question: is it just letting companies hide their bad actions? Some people argue that businesses are creating carbon pollution and then paying to make up for it, like paying a fee to forgive their carbon "sins".

Let's look at the other options. In a perfect world, businesses would run without creating any carbon. But, the truth is, with the technology and infrastructure we have today, it's nearly impossible to run a completely carbon-neutral business. Most human activity - transportation, manufacturing, heating, construction etc - cause some pollution.

Until we have renewable energy infrastructure and carbon neutral technologies covering 100% of human activity, some carbon emission is unavoidable. Telling companies to completely get rid of their emissions might sound nice, but it doesn't help much if it stops more practical ways to reach net zero in the necessary timeframe.

How carbon credits help solve climate change

Carbon credits play a big part in this situation. When used correctly, they let companies balance out their emissions by supporting projects that really do lower the amount of carbon in the air. Like any organisation, these projects need money to run; they can't just depend on volunteers or donations. The money from carbon credits gives them this needed financial help.

But carbon credits have an even bigger benefit. The money a company spends on carbon credits doesn't just balance out its emissions for the year, it helps fund more projects. As more businesses start using carbon credits, under pressure from their customers demanding they go net-zero, more money goes towards projects that help fight climate change.

Here, carbon credits play another important role in encouraging advancements in carbon capture technology. Even though these technology-based solutions are currently expensive, with carbon credits from these projects sometimes costing hundreds of pounds compared to cheaper, nature-based solutions, buying credits in technology projects helps them develop and scale faster.

Improving the voluntary carbon market

While carbon credits have given companies a strong way to balance out their carbon emissions, the voluntary carbon credit market, like many new markets, has had to deal with issues. The question of whether some projects are really reporting accurately, and if their carbon credits truly equal a tonne of carbon offset, have shaken trust.

There have been instances of overestimated impact or double-counting, although these have been pretty rare in recent years. Anything that weakens the trust in the market is both wrong and against the interests of everyone in the voluntary carbon market. There is a strong push from everyone involved in the voluntary carbon market to fix these issues. They have been mostly stamped out through improvements to project validation, technological innovations like using satellite imagery and AI to watch forestry projects, and more scrutiny as more people get involved in the market as it grows.

It's key to remember that, while it's necessary to fix any and all such issues, these are just growing pains in a market that is quickly growing and advancing. They point out areas to improve rather than inherent issues in the principle of carbon credits.

Plus, the variety and quality of projects that make carbon credits, as well as assessment methods, are getting better each year. The market has quickly learned from earlier projects to create more solid, reliable, and effective projects.

The verdict

Seeing carbon credits as just a form of "greenwashing" doesn't help in our efforts to fight climate change. Insisting that businesses should just stop any activities that release carbon or find a way to make their operations net zero without the use of external tools might sound good, but given our current technology it's not really achievable.

When a company that causes pollution buys carbon credits to offset their emissions by supporting another company's work it's not "greenwashing". Actually, this is the system doing what it's supposed to do. Businesses are using their resources to balance out the carbon emissions they can't avoid producing.

So the next time you hear someone asking "Aren't carbon credits just greenwashing?" remember that when used right, the answer should be no.

Download the Ora app to start investing in carbon credits.