CARBON credit is a creative strategy promoting a more sustainable and environment-friendly global economy, and aims at assisting companies in reducing their carbon footprint. This is a crucial part of the larger carbon trading mechanism. Besides, the idea is centred on putting a monetary value on lowering or avoiding carbon dioxide emissions. Carbon credits are given to businesses and organisations that effectively lower their emissions below a predetermined standard. These credits can subsequently be bought, sold, or exchanged on the carbon market.

Additionally, businesses fund initiatives aimed at lowering or eliminating greenhouse gas emissions. Initiatives for afforestation and transition to renewable energy are examples of such undertakings. After a project is put into action, it goes through stringent certification and verification procedures to guarantee that the emission reductions are real, and adhere to predetermined guidelines.

The project receives carbon credits if verification is completed successfully. Usually, one metric tonne of carbon dioxide, or its equivalent, is reduced for every credit. Afterwards, these carbon credits can be exchanged on other carbon markets. In order to achieve their sustainability objectives, buyers — often businesses looking to offset their emissions — purchase these credits. However, it is difficult to measure and verify emission reductions accurately, which raises questions about the validity of some carbon credits.

Besides, credit prices in the carbon market are subject to swings, and, as such, players must carefully negotiate this changing environment. As such, keeping the carbon credit market credible requires maintaining consistent and strict standards across all projects.

Moreover, ways of tackling obstacles and augmenting the lucidity of the market are required to guarantee long-term viability.

Fazal Ur Rehman Qazi
Karachi

Published in Dawn, May 13th, 2024