Companies Are Buying Carbon Credits

Many companies are pledging to eliminate or lessen their own greenhouse gas emissions, as well as support carbon-reducing projects outside their operations. To meet these goals, some may need to offset their remaining emissions with carbon credits. Carbon credits are issued by certified emission reduction projects — like renewable energy farms, efficiency measures at industrial facilities, or forest protection programs — that reduce the amount of carbon in the atmosphere compared to a business-as-usual scenario. They can also be earned by removing carbon from the air through natural solutions (like reforestation and afforestation) or technological ones, such as direct air capture.

Hundreds of companies, including tech giants like Apple and Netflix, airlines and oil companies, and even retail brands are aiming for net-zero emissions, requiring that they remove as much greenhouse gases from the atmosphere as they put into it. But as companies are discovering, it isn’t always easy to eliminate or lessen their own emissions, so they rely on carbon offsets to cover the gap.

While many of the emissions-reducing projects tied to these offsets are high-quality, some are not. As a result, some of the largest purchasers of these carbon.credit are erasing emissions from their records without making the eco-friendly changes needed to do so. The carbon markets are rife with low-integrity carbon credits — sometimes called “junk offsets” by experts — that have little or no impact on climate change.

Which Companies Are Buying Carbon Credits?

The booming carbon offset market has made it difficult for buyers and sellers to connect, in part because the industry lacks a standard set of rules and practices. Projects that produce the credits need to be reviewed and approved by a third-party verifier, which ensures that they are truly reducing emissions compared to a baseline (i.e. the projected emissions would have occurred in the absence of the project). In addition, they need to be “additional” – in other words, reduce or prevent more emissions than would have happened if the project had not existed — and the benefits should be permanent.

Buyers and sellers are further constrained by a voluntary, unregulated carbon market, which makes it difficult for them to track the carbon credits they purchase. Moreover, the different attributes of each credit – such as its origin and region – are valued differently by buyers, resulting in a time-consuming and inefficient transaction process that takes place over the counter.

But there are signs that this nascent market is maturing, and that a future where the voluntary carbon market supports a robust and efficient trading system is possible. One example is Xpansiv, the world’s largest carbon credit marketplace, which hosts 90% of all carbon transactions. It counts companies with major net-zero commitments, such as Chevron, British Airways, and Shell, among its clients. Another promising company is BEP, which provides a standardized platform for carbon credits that can be paired with a variety of different project types. It is backed by investors with a range of appetites for risk, and has already attracted investments from the likes of JPMorgan Chase and Salesforce.