Carbon Credits

What is Carbon Credit?

A carbon market enables investors and companies to trade both carbon credits and offsets at the same time. This not only helps alleviate the environmental crisis but also opens up new market opportunities.
The emergence of new challenges typically leads to the creation of new markets, and the current climate crisis along with increasing global emissions is a perfect example of this phenomenon. Interest in carbon markets has recently been revived. While international carbon trading markets have existed since the 1997 Kyoto Protocols, the rise of new regional markets has sparked a significant increase in investment. When a company buys a carbon credit, usually from the government, they gain permission to generate one ton of CO₂ emissions. With carbon credits, carbon revenue flows vertically from companies to regulators, though companies who end up with excess credits can sell them to other companies

How does it work in New Zealand and worldwide?

The number of credits issued each year is typically based on emissions targets. Credits are frequently issued under what’s known as a “cap-and-trade” program. Regulators set a limit on carbon emissions – the cap. That cap slowly decreases over time, making it harder and harder for businesses to stay within that cap. You can think of carbon credits as a “permission slip” for a company to emit up to a certain set amount of CO₂e that year. Around the world, cap-and-trade programs exist in some form in many countries, including Canada, the EU, the UK, China, New Zealand, Japan, and South Korea, with many more jurisdictions considering implementation.

The New Zealand Emissions Trading Scheme is the Government’s main tool for reducing greenhouse gas emissions. (NZ ETS) is a key tool for meeting their domestic and international climate change targets, including the 2050 target set by the National Climate Change Response Act 2002. The purpose of the NZ ETS is to:

• assist New Zealand to meet its international obligations under the Paris Agreement
• help New Zealand to meet its 2050 target and emissions budgets.

Learn more from here: 

https://www.youtube.com/watch?v=YqTlzbXMzec&t=31s

 What is the supply/demand mechanism?

In the carbon marketplace, there are two main types of markets for selling carbon credits. The first is a regulated market governed by “cap-and-trade” regulations at the regional and state levels. The second is a voluntary market where businesses and individuals choose to purchase credits on their own to offset their carbon emissions. Essentially, the regulatory market is mandatory, while participation in the voluntary market is optional. Within the regulatory market, companies participating in a cap-and-trade program receive a specific number of carbon credits annually. Some companies generate fewer emissions than their allotted credits, resulting in a surplus of credits. Conversely, other companies—especially those with older or less efficient operations—emit more than their allocated credits can cover. These businesses seek to buy additional carbon credits to compensate for their excess emissions out of necessity.

Let’s say two companies, Company 1 and Company 2, are only allowed to emit 300 tons of carbon. However, Company 1 is on track to emit 400 tons of carbon this year, while Company 2 will only be emitting 200 tons. To avoid a penalty comprised of fines and extra taxes, Company 1 can make up for emitting 100 extra tons of CO₂e by purchasing credits from Company 2, which has extra emissions room to spare due to producing 100 tons less carbon this year than they were allowed to.

How we help you get into this market?

PathWay2050 assists businesses and organisations in New Zealand and worldwide in identifying and unlocking their potential to implement sustainable and smart initiatives to achieve the NetZero 2050 goals aligned with the global and national ambitions of climate actions. One of our services is to help businesses engage with the carbon credit market by understanding its mechanisms and benefits. Our mission is to accelerate the transition to a sustainable future, and we believe carbon credits can be a big driver in pursuing the net zero goal for most organisations and helping them finance the abatement projects. Suppose your organisation is to implement any project or initiative that would potentially reduce your baseline GHG emissions. In that case, we can help you measure and report this reduction via an accredited validation/verification process which will ideally create carbon credits for your business. When bought by others (in the carbon registry market) to offset their emissions, this will generate income for your business. 

Do you want to get your emission reductions verified?

We assist you with this process. You will need to 1) submit the required documents to a GHG programme 2) get validated and verified and 3) get the verified carbon reduction registered

Once the carbon is verified, there are 3 ways you can claim the reduction as follows:

internal offsetting for:

• • using towards your own NetZero goal
  • claim in your ESG annual reporting
  • improving your market image

sharing out the credit to:

• • • help your business partners (value chain)
    • local businesses that are struggling (contributing to SDG17 partnership)
    • help international businesses that are struggling with emission reduction (contributing to SDG17 partnership)

offer in VCM (volunteer carbon market)

• • sell to the VCM market 
  • sell in cap-trade market e.g. ETS 
  • sell to a carbon broker

Reach us out today if you are interested in this market and the above opportunities and we will run you through more detail of the process and help you understand how this works best for your organisation. We work with numerous projects from multiple sectors and we are experienced in this space.