As governments pressure the private sector to limit greenhouse gas emissions, the world’s largest companies have turned to a financial product to offset their environmental footprints — carbon credits.
It’s a hot market, hitting all-time highs in volume and on track to be worth $1 billion in 2021, according to Ecosystem Marketplace, a market publication run by the environmental finance research nonprofit Forest Trends. And just ahead of the United Nations Climate Change Conference starting Sunday, the U.N. Environment Programme issued a report that said carbon markets could “help slash emissions” with clearly defined rules and transparency.
But why are carbon credits important? And why does it matter whether they’re used or not?
What is a carbon credit?
A carbon credit is a kind of permit that represents 1 ton of carbon dioxide removed from the atmosphere. They can be purchased by an individual or, more commonly, a…