US Have Carbon Credits

A carbon credit is a kind of permit that represents one ton of greenhouse gas emissions removed from the atmosphere. The concept behind them is simple: an individual or company who wishes to offset their own carbon footprint can buy a carbon credit from someone who either reduces, avoids, or destroys greenhouse gases in the form of energy production or other business activities. They can either purchase them on the voluntary market, which has recently seen a major acceleration in growth thanks to corporate net-zero goals and growing interest from investors, or through regulated markets.

The most familiar regulated carbon markets are called “cap-and-trade” programs. They set an overall limit on emissions (called a cap) and then auction off allowances to highly polluting businesses each year, so that they can remain within the cap by purchasing credits or selling any excess. This is done to increase efficiency in the marketplace and provide an incentive for companies to find ways to cut their emissions, rather than just shifting them to other sources.

These regulated carbon.credit markets are now in operation or being considered in nearly all countries and regions of the world, including the US states of California and Oregon. Other governments like the UK and Canada are developing their own versions of a cap-and-trade program, while other entities, such as a private company, can make a voluntary purchase on the carbon market to offset their own emissions.

Does the US Have Carbon Credits?

There are also a number of different organizations that verify the authenticity of carbon credits, which helps assure the quality of the products being sold in the voluntary market. For example, Verra, a nonprofit founded in 2007 by environmental and business leaders, has become the industry standard for verification of these credits. It uses a combination of accounting methodologies that are specific to each project type, independent auditing, and a registry system to ensure that “a credit buyer has confidence they’re buying something that actually exists.”

Some of the most popular projects for reducing carbon emissions include land-use change such as reforestation and restoring old forests, and soil management. These projects use Mother Nature’s natural carbon sinks, in which plants convert CO2 from the air to organic matter that is buried by other plant life and preserved in the ground for years to come, to remove emissions from the atmosphere. Other types of carbon removal and reduction projects include capturing and storing carbon in geological reservoirs, using fossil fuels to create electricity and hydrogen, and burying it underground in ocean sediment.

Many of the same actors in the carbon market – including brokers, traders, and financiers – play both roles on the regulated and voluntary sides of the marketplace. For instance, there are a number of carbon exchanges that have a trading arm and a project development arm, while some finance players have their own carbon credit investment or brokering arms. This overlapping of roles can lead to misaligned incentives, with the risk that some may be rewarded for their own efforts while others are penalized. To reduce this conflict of interests, a bipartisan bill introduced by Rep. Abigail Spanberger earlier this year, the Growing Climate Solutions Act, seeks to establish a registration and certification program at USDA for those involved in carbon market activities. This would help break down the barriers that prevent farmers, ranchers and forest landowners from participating in carbon credit markets and monetizing the climate value of their sustainable practices.