Looking to buy carbon credits to offset your carbon footprint, but unsure how to do so? In this article, we guide you through the process of purchasing carbon credits. As the world moves towards Net Zero, more and more companies are offsetting their carbon footprint, by contributing financially to sustainable projects around the world. But how exactly does offsetting work, and what are your options when looking to purchase carbon offsets? What is carbon offsetting through buying carbon credits? Carbon offsetting is the process of purchasing carbon credits on the carbon market generated by CO2 absorption projects, to make up for a company or person’s emissions. First, it requires calculating the carbon footprint of your company. Let’s say a company has emitted 1,000 tons of greenhouse gases (GHG) in a given year: to offset this footprint, it will need to buy 1,000 carbon credits, each representing 1 ton of CO2-equivalent. This accounting system is a relatively simple way to ensure that the world doesn’t emit more than it can absorb, as well as providing much needed financing to carbon mitigation projects. Once you know what your carbon footprint is, and after you have taken measures such as switching to renewable energy or cutting electricity consumption to reduce it, it is time to offset the remaining carbon emissions by purchasing carbon credits. What are ‘good’ or ‘bad’ carbon credits?  Different ways to buy carbon credits There are several ways to buy carbon credits to offset your footprint. Buy carbon credits directly from developers The most direct way to purchase them is at the source: from the organization responsible for the project you want to support. In this case, your company can either invest in the development of the project with a promise of return in the form of future carbon credits, or buy what are called Emission Reduction Purchase Agreements (ERPAs), upfront payment for carbon credits to be delivered as and when they are generated. This latter option is more common when the project is already at a later stage of development. There are two main advantages to buying your carbon credits directly from the project developer:  it allows you gain a deep understanding of the project and get involved in its management you can secure lower prices than with a reseller But this option is not for everyone: it requires a certain amount of research and knowledge to identify and engage with suitable projects the carbon credits are not immediately available as you purchase them Purchase carbon credits through a broker Many project developers work with brokers to arrange the sale of their carbon credits. In this case, your company would get in touch with a broker and give them specifics about the type of project you’re looking for (location, price, etc.). The broker would find a project that suits you, then purchase carbon credits on your behalf and resell them to you with a mark-up. This option can seem more practical than dealing directly with a project, particularly if you need a lot of carbon offsets: as a service provider, the broker handles all transactions. But there are some significant downsides to take into account: brokers rarely disclose their pricing structures, so you have no clarity on the price of the carbon credit vs the broker fee in some cases, brokers charge companies almost three times as much as they pay project developers, abusing their power as the middleman and defeating the purpose of climate finance The Financial Times recently exposed just how opaque carbon credit brokers’ practices can be. This is not an option we recommend. Buy carbon credits on the ClimateTrade marketplace The ClimateTrade marketplace combines the positive impact of buying carbon credits directly from the developer with the practicality of using a broker. On our user-friendly platform, you can browse more than 140 certified projects categorized by type, country, and United Nations Sustainable Development Goals, and choose the carbon offsets most suited to your objectives.   Our climate marketplace is accessible to all individuals and companies who want to take action against climate change by supporting sustainable and certified projects. It’s easy to get started following simple steps: Visit our marketplace Choose from a variety of projects, including reforestation, protecting biodiversity, removing trash from oceans, and supporting communities. Find a project that aligns with your values and goals. Choose the units, tons, or MWh that match your own carbon footprint, or specify the amount you wish to contribute. Complete your transaction, and you will receive a customized certificate with details of your offset. The project will receive the funds, and you can rest assured that you’ve taken a step toward reducing your impact on the environment. Automatically receive your traceable carbon offsetting certificate Let your clients offset your carbon footprint ClimateTrade also offers an API and Widget that can be easily integrated into your own payment system, letting your clients offset the carbon footprint of your products and services as they make their purchases.  Check out our API and Widget and make your offering carbon-neutral now.

A Financial Times article published yesterday (May 2) exposes the opacity of the carbon market, and denounces the extractive practices of brokers that act as middlemen between sustainable project developers and companies looking to offset their carbon footprint. The article’s author spoke to a number of project developers to learn more about the role of brokers and the value of the work they provide. While several developers explained that brokers were helpful in getting projects set up and selling carbon credits, some denounced their “absolutely extractive” practices. In one of the examples mentioned, the carbon credits generated by Worldview International Foundation (WIF) were sold at US$30 a piece by a reseller, double the price offered by WIF itself and almost triple what the organization was paid by the reseller. This is exactly the type of abusive practices that ClimateTrade aims to eliminate: by connecting companies looking to offset their carbon footprint directly with climate-regenerative projects, we get rid of the middlemen. The ClimateTrade marketplace is a peer-to-peer platform where project developers decide at which price to sell their carbon credits and negotiate directly with buyers, maintaining complete control on all transactions.  Because for climate finance to achieve its full impact, we must ensure that the wide majority of offset funds go to the people that work every day on the field to preserve our ecosystems.  Lack of data around transaction costs The article talks about the fact that there is “shockingly little data” around the percentage of carbon finance that ends up in the pockets of brokers, and of the middlemen’s reluctance to disclose their pricing structures. ClimateTrade is well aware of this issue: in our white paper A 2030 Outlook for the EU ETS, we point to the lack of public information around transaction costs for purchasing, selling or cancelling carbon credits in the European mandatory carbon market, but also in the global voluntary carbon market.  The closest thing to a transaction cost estimation we found was a June 2020 working paper published by the London School of Economics that analyzed annual transaction and compliance data between 2008 and 2012 in the EU ETS (2008-2012) and developed a model to include transaction costs in emissions trading price predictions. The authors found that costs of around €10,000 per year plus €1 per credit traded allowed them to reach the most accurate predictions.  The importance of traceability In the Financial Times article, Kamal Kapadia, co-founder of Terra.do, a climate educator, explains that “if we can’t trace who the money is actually going to and how much is getting siphoned off along the way, the development and poverty alleviation claims seem suspect.”  Traceability is just as crucial as transparency in the development of efficient and impactful carbon markets, and it is at the heart of ClimateTrade’s operations. We base all our transactions on blockchain infrastructure, which means that data cannot be duplicated or manipulated. This guarantees the integrity of data and the traceability of carbon offsetting transactions.  In the end, it gives our customers the comfort of knowing that their money actually ends up in the projects they want to support: once a transaction is completed, they receive a nominative certificate with details about their chosen project and a blockchain key. Related articles: Why blockchain is key to fulfilling the ICC Carbon Pricing Principles ClimateTrade is always looking for new ways to make the carbon market more efficient and ensure maximum impact against climate change. Get in touch to find out more.

When it comes to choosing the right carbon credits to offset your carbon footprint, there are several aspects to keep in mind beyond company or personal preferences. So your company has decided to offset its carbon footprint: you have taken the time to identify your emissions sources, calculate and categorize them between Scope 1 (own emissions), Scope 2 (electricity) and Scope 3 (supply chain). You have analyzed the results and put measures in place to reduce your carbon footprint wherever possible. And now is the time to offset your remaining CO2 emissions by purchasing carbon credits from a climate mitigation project. Do you know how to choose the right carbon offsets for your company? What are carbon offsets or carbon credits A carbon credit, sometimes known as carbon offset, is a tradable unit representing one ton of CO2-equivalent that has either been removed or avoided from the atmosphere. These credits are generated by different types of sustainable projects that either absorb carbon or avoid it from being emitted in the first place. Once generated and certified by a recognized third party like the Carbon Development Mechanism (CDM), Gold Standard or Verra, these carbon credits can be sold to companies and individuals as a way to offset their own carbon emissions. Different types of carbon offsets There are several types of carbon credits, depending on the project that generates them.  Renewable energy: These projects involve building solar, wind or hydropower facilities to produce carbon-free electricity, reducing our reliance on fossil fuels and the carbon emissions associated with power generation. Forestry and conservation projects: These include reforestation (planting trees in a deforested area), afforestation (planting trees in an area that previously didn’t have any) and ecosystem conservation projects (preventing deforestation and preserving biodiversity). These projects are also sometimes called nature-based solutions. Waste to energy: In waste-to-energy or biogas projects, developers collect waste from landfill, communities or agricultural activities and capture the methane it produces to produce electricity. This way, they reduce the amount of methane emitted into the atmosphere and generate cheap and sustainable power. Other projects can include energy efficiency initiatives that reduce the need for fossil fuels, or community projects that introduce new ways to cook or generate electricity, reducing carbon emissions and avoiding local deforestation. What makes a good carbon offset? Considering the urgency of the climate crisis, all carbon offsetting projects are ‘good’ at this time. One way or another, they allow people and companies to measure and mitigate their climate impact, and they direct financing flows towards projects that work every day to preserve the planet. That being said, the lack of standardization in this space means that it’s not always clear what to look for when choosing carbon credits, or how to measure the impact of projects that generate them. As a result, some carbon offsets can be seen as more controversial than others. Globally recognized standards It is very important to choose a project that has been certified by a globally recognized standard: at the end of the day, the quality assurance of a project depends on transparency around it and who is behind it. Reputable standards follow best practices to ensure that these expectations are met.  All the projects listed on the ClimateTrade marketplace are certified by recognized entities to give companies the comfort of knowing that the credits they buy have been verified. Related articles: BME and ClimateTrade PoC paves the way for digital verification and certification of climate projects Carbon offset additionality and the Paris Agreement One qualitative element introduced by the Paris Agreement around carbon offsetting projects is the notion of additionality. In a March 2022 paper on the topic, Gold Standard defines additionality “as a question of whether an activity that reduces emissions would have occurred in the absence of the incentive created by carbon finance – by the value given to emission reductions through their representation as carbon credits (…) that can be traded and used by other entities”. In other words, would the projects happen without the financing provided by carbon offsetting? The principle of additionality is what makes carbon credits from renewable energy increasingly controversial: in many cases, solar or wind energy is now cheaper to produce than fossil fuel energy, and private investment in this sector is abundant. This is making renewable carbon credits cheaper than other types of credits, and poses the question of whether these projects should be given the opportunity to receive carbon financing at all. Have a close look at the project’s ratings Rating tools are a great way to evaluate the quality of carbon credits once they provide independent and objective assessments that increase the credibility of credits and mitigate the risk of purchasing low-quality or fraudulent offsets. Overall, rating tools such as BeZero Carbon, Sylvera and Calyx Global, help companies ensure compliance with regulatory requirements, provide transparency in the carbon market, and support sustainable development by assessing the broader social and environmental impact of carbon projects. Due diligence as an efficient tool Conducting due diligence on the additionality of carbon credits from sustainable projects is another way for companies to ensure that the credits they purchase are credible, effective, and aligned with their sustainability goals. Due diligence helps identify any risks or red flags associated with the project, ensures compliance with regulations, and assesses the project’s broader social and environmental impact. By conducting due diligence, companies can make informed decisions that support their sustainability strategies and contribute to reducing greenhouse gas emissions. Measuring the impact of carbon credits Aside from additionality, people should consider impact in a holistic way when choosing a project to offset their carbon footprint. For instance, what are the benefits of the project for biodiversity, or for the local community? One way to measure this impact is via the Sustainable Development Goals (SDGs). The 17 goals defined by the United Nations comes with a much longer list of practical targets associated with each goal. These targets make it relatively easy to measure how a specific

Transparency, reliability and collaboration are core elements of the Carbon Pricing Principles developed by the International Chamber of Commerce (ICC) to support the global climate strategy. Blockchain technology can support all three of these aspects. In a webinar organized by ICC Spain and ClimateTrade to launch the Spanish translation of the ICC Carbon Pricing Principles this week, speakers emphasized the importance of a unified and fair carbon price to help global organizations adapt to the climate transition.  According to José Lindo, Co-Founder and Head of Impact at ClimateTrade, the three keywords to be considered for the correct application of the Principles are consensus, traceability and transparency. “DLT technologies like ClimateTrade bring order to the complexity of all the various carbon markets and mechanisms, creating consensus, trust, transparency and connection with different jurisdictions,” he said.  Indeed, blockchain technology is based on decentralized governance and data storage, which makes it inherently suited to the pursuit of consensus. Additionally, since all data stored on blockchain is immutable, it allows for full traceability in all transactions. A fair and ethical carbon price In terms of transparency, Lindo pointed out that with the upcoming implementation of the Carbon Border Adjustment Mechanism (CBAM) in Europe, countries will be expected to justify how they set the price of carbon emissions locally. “I’m convinced that the EU and the World Trade Organization will manage to reach an agreement on the key point: creating a fair and ethical price of carbon that jeopardizes neither European companies nor decent job generation in developing countries,” he added. All speakers agreed that, combined with CBAM, the ICC Carbon Pricing Principles (presented in English at COP26 in Glasgow but only now translated to Spanish) are set to harmonize carbon pricing mechanisms around the world.  Internalizing externalities José Luis Blasco, Global Sustainability Director at ACCIONA, noted that the carbon price is a necessary instrument to allow companies to internalize the externality that is climate change. He added that in the context of the generalized Net Zero by 2050 target, companies only have 28 years left to ensure they don’t become obsolete. However, according to him, the carbon price only begins to accelerate the transition from US$60 a ton; below this price, the mechanism has no tangible impact. While the price of carbon is currently much lower – at least in the voluntary market – companies can already integrate a shadow carbon price of US$60 or higher to internalize the climate transition in their business planning. The 10 Carbon Pricing Principles Here are the 10 Carbon Pricing Principles developed by the ICC: Focus on GHG emissions reduction as prime target, including the prevention of GHG leakage Create a reliable, predictable overall framework Promote consistency between climate, energy, trade and taxation policies Create a clear and robust transparency framework Maintain​​ accessibility to and affordability of low-carbon and clean energy sources Promote international linking of carbon pricing instruments Recognize that there is no “one-size-fits-all” single instrument Couple carbon pricing with investment in climate change mitigation and adaptation Ensure international cooperation for greater consistency globally Develop mechanisms through inclusive and transparent consultation with business and other key stakeholders The full document is available to download from the ICC website.

Several Spanish regions have created corporate carbon footprint registries to encourage emissions offsetting and contribution to local sustainability projects. Catalonia was the first in 2015 to encourage companies to report their emissions voluntarily. Andalucia followed in 2020 by setting up a voluntary registry with several new features, among which a connection to the State Ministry’s registry and the promotion of offsetting via marine projects (known as Blue Carbon). After that, the Balearic Islands made carbon footprint declaration and periodic verification mandatory for companies of more than 50 employees in 2022. Finally, the Canary Islands are now replicating Andalucia’s model with a voluntary registry for entities that choose to declare their carbon footprint. Catalonia: Voluntary corporate reporting since 2015 The voluntary agreement program for the reduction of greenhouse gas emissions (GEI) is a tool promoted by the Catalan Climate Change Office (OCCC) for those looking to make a voluntary GHG reduction commitment that goes further than what is required by law. Through the agreement, signatory organizations commit to follow their GHG emissions and establish reduction measures annually. Since 2015, these organizations have communicated their GHG emissions data to the OCCC annually, as well as their reduction measures. With this data, the OCCC creates a yearly analysis and presents it as a report with infographics with information about the type of organizations reporting, how many and what kind of measures they have put in place, as well as the global yearly variation in emissions. Andalucia: The first system connected to the Ministry  The Andalucian System for Emissions Offsetting (SACE), is a voluntary set of measures created in 2020 to fight climate change and promote the transition to a new energetic model in Andalucia. It provides the corporate sector with the opportunity and the means to actively participate in the fight against climate change. Emissions reduction goals can be achieved partially or entirely through emissions offsetting, which in this system is represented by absorption units (UDA) generated by offsetting projects or self-offsetting of emissions. As a reflection of their profound collaboration, the Agriculture, Ranching, Fishing and Sustainable Development Council and the Ministry for the Ecological Transition and Demographic Challenge have created a simplified system for declaring carbon footprint on both SACE and on the Ministry’s carbon footprint, offsetting and capture project registry. This way, organizations that choose to declare their footprint in both registries can request to do so through SACE. SACE includes: Emissions report: self-assessment of emissions via a calculation tool provided by SACE Reduction plan: definition of a series of actions to reduce emissions Plan execution: achievement of the actions defined in the plan Offsetting: emissions that cannot be reduced can be offset through offsetting projects or self-offsetting Carbon absorption projects can include forestation, reforestation, restoration or conservation of existing forest areas, coastal ecosystems, meadows and Mediterranean forests, wetlands, marine vegetation or phanerogams and any other natural space, as well as projects aiming to protect or increase soil organic matter through agroforestry or agriculture. The difference between offsetting and self-offsetting depends on whether projects are located on public land (for offsetting) or on private land with authorization (for self-offsetting). Blue carbon innovation in Andalucia since 2021 The Andalucian ​​Climate Change Office (OACC) also allows blue carbon absorption projects. In the framework of the Life Blue Natura project, coordinated by the Agriculture, Ranching, Fishing and Sustainable Development Council, carbon deposits held in fields of Posidonia oceanica and in tidal marshes have been quantified. These coastal ecosystems have been capturing carbon from the atmosphere for millennia – this is what we call blue carbon. Andalucia features vast tidal marshes and marina phenogram prairies. Financing for restoration and conservation projects in these habitats is made possible by turning them into absorption projects for offsetting organizations’ greenhouse gas emissions. The region has developed fundamental tools such, as the Andalucian carbon standard for the certification of blue carbon credits, the carbon sequestration calculator and the Andalucian catalog of blue carbon projects where the first such pilot projects have been listed: one in the Bahia de Cadiz Natural Park, and another in the Cabo de Gata Natural Park. Balearic Islands makes carbon footprint registration mandatory in 2022  After a legislative phase in 2021, the region is currently building the registry. The Balearic Island government is set to make it mandatory for medium and large companies to register their carbon footprint, after calculating emissions and having them verified independently by September 30th, 2022. Bill 48/2021, which came into force at the start of 2022, creates the Balearic carbon footprint registry and establishes the obligation for companies with 50 employees or more working from the islands, as well as those with an annual turnover of over €10 million, to register with the autonomous community government Annual carbon footprint calculations and emissions reduction plans must be added to the registry to comply with the Balearic climate change mitigation targets. The system also allows companies to mention their chosen CO2 sequestration projects, but this isn’t mandatory. The rest of companies, as well as individual citizens, can also register voluntarily to provide the government with the most precise information about the islands’ emissions, allowing it to set up the mechanisms necessary for their reduction. The structure of the information stored in the Balearic registry will be compatible with the one in the State registry. Canary Islands’ carbon footprint registry  This will be a basic instrument to move towards decarbonization in the Canary Islands’ economy. All natural persons and legal entities can choose to register, though some will be obligated to do so by law. The information to register includes the annual calculation of the carbon footprint associated with activities in the Canary Islands, as well as data relating to emissions reduction plans and CO2 sequestration projects. Registry digitization: the next step The digital voluntary registry developed by Spain’s stock market operator BME and ClimateTrade, which was launched last February, will be key to the correct functioning of future voluntary carbon mechanisms, such as those mentioned above. On top of managing information