Carbon Credits Be Sold

Carbon credits are a kind of permit that represents one metric ton of reduced, avoided or removed greenhouse gases (GHGs). They can be sold by individuals or companies to make up for their own GHG emissions. The voluntary market is gaining momentum, thanks to recent corporate net-zero goals and interest in international climate targets such as the Paris Agreement’s goal to limit global warming to 1.5 degrees Celsius over preindustrial levels.

The price of carbon.credit varies significantly, with the type of project (reforestation, methane capture, etc) being one of the biggest factors. The value of a credit to an end buyer is further influenced by its quality and associated co-benefits (e.g., biodiversity protection, local economic development).

A key factor that drives prices is the size of the credit market and its overall liquidity. Larger credits, also referred to as megatons, are more likely to be traded on exchanges than smaller ones. This helps lower the risk for investors who would be more comfortable with a higher level of transparency and verification. Exchanges have also been working to simplify and speed up trading by creating standard products that ensure some basic specifications are met, such as a specific underlying project type, a fairly recent vintage, and certification from a limited number of standards.

How Can Carbon Credits Be Sold?

Another major factor influencing prices is the sourcing of carbon credits. Retailers buy credits from producers and then sell them to end buyers, typically charging a small commission in the process. These retailers can be found on the exchanges, or they may have their own projects to develop, such as through reforestation or methane capture.

There are also a number of independent carbon credit producers who produce their own credits, often using regenerative agriculture practices to increase the amount of carbon stored on land. These independent producers can be found on non-exchange platforms, such as LandGate, where a potential purchaser can visit the website and browse land available for lease for carbon credit projects, including reforestation, avoided deforestation, and methane capture. Potential purchasers can then communicate with the farm owner directly to learn more about the specifics of each project and request pricing and any other lease stipulations they may require.

According to our research, Early Adopters comprised 3% of the representative sample. These are consumers who have already purchased carbon credits or expressed an interest in doing so in the past two years. They are largely urban, millennial, well-educated, and tech-savvy; they have higher incomes than other survey segments and have a higher awareness of their own carbon footprint. They are also the most willing to pay more for sustainable options and are most familiar with various types of carbon projects. They also prefer verified carbon credits over unverified ones, similar to how we would only trust a doctor who has graduated from medical school, rather than an intern. This group is a key target for education around the benefits of carbon credits.