How does the carbon credit market work?

As more awareness about climate change and its dire consequences for ecosystems and all living things is emerging, the carbon credit market is becoming increasingly popular in the media.

Thus, this option is outlined as one of the most innovative and disruptive measures in reducing CO2 emissions, one of the main Greenhouse Gases (GHG).

But what is a market bond?

Carbon credits

Also known as carbon credits, they are proposed as an international mechanism to reduce carbon dioxide (CO2) emissions, thus reducing global warming, one of the most dangerous consequences of climate change.

By paying these bonds, the companies that acquire them have the right to generate emissions, considering these as a exchangeable type good.

Carbon credits allow you to acquire a Certificate of Reduced Emissions (CER). Thus, a CER would be equivalent in the carbon credit market to a ton of carbon dioxide that we save the planet.

The origin of the carbon credit market

Carbon credits emerged as one of the three mechanisms proposed in the Kyoto Protocol. The idea is to reward companies that pollute the least, and fine those that pollute more than allowed.

This was of special relevance to turn companies into actors of change against climate change; and especially in highly industrialized nations, which also have legislation that makes it mandatory for them to find and apply strategies to reduce GHG emissions — especially CO2.

The functioning of the bond market

Depending on the activity they carry out, companies have a maximum allowed amount of emissions. But this is not the only criterion: the size of the companies and the project in which they are involved are also particularly relevant.

The importance of projects, which must be green, responds to the obligation that the same carbon credit cannot be applied to more than one project.

When companies need to emit more than what is allowed, carbon credits — equivalent to tons, as we explained earlier — come into play, so that, having them in their possession, they can emit the equivalent amount of CO2.

Trading with carbon credits

However, if companies produce less excess emissions than they were allowed thanks to the acquisition of carbon credits, these can be traded in the carbon credit market.

Selling the bonds is a great way to grant the right to other companies that need it. However, in the carbon credit market, companies must pay the monetary price set, either by the seller, or by the market itself.

Advantages of participating in the carbon credit market

The benefits that companies obtain when they become part of the carbon credit market are several. In the first place, it improves their reputation, cushioning risks and allowing them to position themselves, before the public opinion, as leaders in the fight against climate change.

Also, it is very advantageous that the reduction of emissions that they carry out is carried out respecting the highest quality standards thanks to the verification of third parties.

As can be seen, the fact that systems are being created and perfected in the fight against global warming and GHG emissions is a reflection not only of greater awareness; also of the urgency that the critical situation of the planet requires.

And remember that, with the Save The Planet Now compensation cards, you too can become an actor of change, supporting sustainable projects with the environment and thus mitigating the carbon footprint that you generate every day with your home and your activities.

Join the change!

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