Why do carbon credits matter for your businesses in Australia?

As the world continues combating climate change, reporting emissions and responsibility for those emissions will change from voluntary to mandatory. Businesses big and small will eventually be held accountable for their carbon emissions.?

As a result, companies will need to measure and significantly reduce their carbon emissions to remain competitive or viable as a supplier for their Net Zero customers.

This newsletter will discuss what you need to know about carbon credits and what to consider for your business—because for some businesses the carbon credit mechanisms and the economy to buy and sell them will generate revenue opportunities for some organisations..

But first, what are carbon credits??

Carbon credits are a unit of measurement used to quantify greenhouse gas emissions reductions. They can be generated through different activities that result in reductions in greenhouse gas emissions, removing or preventing? emissions from entering the atmosphere. The emission reductions need to be independently calculated and verified every year. Examples are renewable energy, methane destruction, forestation, destruction of refrigerants, agriculture initiatives or carbon capture.

One carbon credit is equivalent to one metric tonne of carbon dioxide (CO2), or its equivalent in other greenhouse gases (CO2e) .?

To put one metric tonne of carbon dioxide into perspective, this is equivalent to the emissions generated by:

• 4023 kilometres driven by the average passenger vehicle
• 428 litres of gasoline consumed?
• 499 kilograms of coal burned???

Although this might sound like a lot, the average Australian has a carbon footprint of 15 tonnes of carbon dioxide per year—which is 15 times the statistic above.?

Second, why are carbon credits important for your business?

Carbon credits are increasingly important as the world tries to prevent minimise climate change..?

And as previously mentioned, businesses in Australia will need to reduce their carbon emissions as part of the Australian government and the world's government's commitment to reach Net Zero..?

Placing a direct cost on carbon emissions through carbon credits makes it possible for organisations to develop financial models that support changing the existing technology, processes and work practices, to lower emissions or deliver net zero solutions.?

It places a direct cost and value to the emissions generated in a business's activities.

Buying carbon credits indirectly funds emissions reduction projects, as the developers of the projects can then sell the carbon credits they generate to other companies.?

Carbon credits are traded on carbon markets, where their price is determined by supply and demand. Currently global prices are increasing? with the rising need and demand for them.

On the other side of the equation is the opportunity for organisations to? develop carbon credit projects.? Better technologies, evaluating and harnessing waste streams, agricultural and forestation solutions can use the Carbon Farming Initiative (CFI), which is Australia's primary mechanism for generating carbon credits.?

Third, how are carbon credits classified??

There are two forms of carbon credits: Permits and Projects.?

Carbon credits from permits is where a person or company has been issued the permit to generate one tonne of carbon dioxide (or its equivalent), as part of the total limit set for them by authorities.

The company can choose to use or sell these credits to other companies that need the credits instead, depending on their carbon emissions targets

Carbon credits from projects are where project activities that remove or avoid carbon dioxide through their activities.?

Fourth, what are the different ways that carbon credits can be traded??

There are two ways that carbon credits are traded which are: compliance and voluntary.

Voluntary carbon credits are purchased by businesses that want to offset their emissions, but are not required to do so by law.

Compliance carbon credits, on the other hand, are purchased by businesses that are subject to emissions trading schemes or other regulations that require them to offset their emissions.

Finally, need help finding the right carbon credit for your organisation?

At Carbon Offset Advisory, we have access to over 1000 carbon emission projects that are certified to the leading global standards.?

We can help your organisation manage carbon credit project selection, purchase, and retirement. Plus, we can assist with credit purchasing strategies for:

• Large multi period transactions
• Forward purchasing
• Risk management?
• Carbon credit banking?

If you're considering starting your journey towards company net-zero emissions, send me a DM to discuss where to begin.

And don’t forget to subscribe to our newsletter to learn more about Australia's journey to net zero emissions.