As the world is thrown into a climate emergency, more public and private organizations are looking towards emission trading and carbon credits as a way of limiting emissions and reducing the global effects of climate change.
As a market-based approach to carbon emissions, it enables the offering of economic incentives to participating emitters who mitigate emissions within a threshold.
This coerces emitters to take responsibility for their carbon emissions or compensate for their emissions by funding equivalent carbon dioxide reduction elsewhere, allowing companies to voluntarily finance decarbonization beyond their frontiers.
These approaches may include allocating carbon credits or offsets to participating emitters, quantitative total limits on emissions produced by participating emitters, buying and/or selling trading mechanisms of carbon credits between participating emitters, automatic market price adjustment based on the total emissions limit, etc.
Beyond carbon offsetting enabling businesses to take responsibility for their carbon emissions by compensating for them with the purchase of carbon credits representing the reduction or removal of emissions elsewhere, it is encouraging companies to continue with increased carbon-emitting activities on the basis that they can always offset. This has led critics to tag carbon markets as greenwashing and a weak measure that does nothing to discourage polluters.
There are also criticisms around the inconsistency in carbon markets implementation and this is based on the fact that carbon credits that are used in one market may not be applicable to another, making the prospect of trading carbon credits as a long-term sustainability measure difficult and inconvenient to achieve.
In addition, there is no defined budget or emissions limit in the different carbon market programs that are operating worldwide all over the world.
Furthermore, there are few opportunities for the private sector to participate voluntarily because carbon markets are regulated.
Despite these criticisms, carbon credits should not be ruled out entirely because they can incentivize emitters to pursue a long-term reduction in carbon emissions and push them to be innovative and seek other ways of energy generation.
The focus should be on making them effective for the general good of businesses and the planet. The question then is, how?
To make carbon credits an effective climate mitigation solution, a number of things need to be considered and one of them is the quality of carbon credits and how businesses claim and use them.
An organization like Carbon Footprint already offers a range of verified, certified, and standard carbon offset projects. These projects also provide wider benefits in addition to carbon reduction like education, biodiversity, food, jobs, security, and health and well-being in developing countries.
Also, the new Carbon Credit Quality Initiative will allow carbon credit buyers to know the quality of carbon credits by rating credits in the market on safeguarding principles, environmental integrity, etc.
Bringing it up to Africa, voluntary carbon markets have the potential to encourage participants to pursue carbon reduction projects in the long run and create a direct incentive for high capital flows from the private sector to participating emitters. Its run-off effects could benefit the African environment and associated communities in the long run.