Carbon Offset Credits

For decades now, the topic of global warming has been at the forefront of political debate. But today, the effects of a warming planet, i.e., extreme weather shifts, are evident around the world. While everyone can do their part to reduce emissions, some emissions are unavoidable.

Individuals and organizations can offset those emissions by supporting activities that help reduce or remove emissions from the atmosphere. We will explore carbon offset credits and how businesses and big names are using them to reduce their net emissions.

What are Carbon Offset Credits?

A carbon offset credit is a transferable instrument certified by governments or independent certification bodies to represent an emission reduction of one metric tons of CO2 or an equal amount of other greenhouse gasses (GHGs). Activities that supply carbon offsets must meet a strict standard of criteria and obtain verification by a third-party agency.

Why do they matter? Well, the goal of many companies, either by moral motivations or government enforcement, is to reduce their carbon emissions or be “net-zero,” meaning they have reduced their carbon emissions to none or offset what emissions they do have with other efforts. This goal is a lofty and expensive one. Carbon offset credits make it easier and more cost-effective for companies to reduce their net emissions by enabling emission-reducing activities elsewhere.

This works to fight climate change because it is a global issue. Reduced emissions in one area of the world benefit the entire atmosphere.

How Are They Used

Every individual and company has a carbon footprint—the amount of CO2 emissions they are responsible for. To reduce that footprint, individuals and companies are purchasing carbon offset credits. One of these individuals is Bill Gates. According to his recent book, he buys “offsets through a company that runs a facility that removes carbon dioxide from the air.”

You can offset your carbon footprint too. For instance, you could measure a portion of your carbon emissions based on how many gallons of gasoline you use and offset that amount by purchasing a carbon offset credit. These credits might help plant trees or remove carbon from the air and store it.

How Carbon Offsets Could Impact Your Investments

Rather than investing in the companies purchasing the carbon offsets, it would be a promising try to invest in the companies providing them. These companies are making strides in what is a long and monumental race against climate change.

If you’re passionate about ESG investing, this may be an area to get involved. For instance, you could invest in a private company reducing carbon emissions, or invest in a provider of carbon offset programs.

Going the private route, made possible by the JOBS Act, will mean meeting the investor criteria to become an accredited investor. If you plan to take the income approach to meet these criteria, learn how to provide proof of assets.

Investing in companies that are providing or supporting carbon offset credits could be a great way to be a part of a growing industry with a huge upside, and reduce your carbon footprint while you’re at it.