Understanding Carbon Credits And Carbon Offsets
As you can see by this world map a few countries have signed the Paris Agreement and the others have all ratified this.
What does being ratified mean? Ratify means to approve or enact a legally binding act that would not otherwise be binding in the absence of such approval. In the constitutional context, nations may ratify an amendment to an existing or adoption of a new constitution.
Over the coming years these will be terms we will hear about daily as they will take on a very important role in business and every day life. I raise this topic today as the World Cup in Qatar advertises itself as a Carbon Neutral event. They purchased 1.8 million carbon offsets from the Global Carbon Council which is a Doha based company specialising in renewable energy. The World Cup is estimated to have generated around 3.6 metric tons of Carbon emissions. Still they have taken steps in the right direction, but definitely not carbon neutral and far from it.
Firstly what is a Carbon Credit?
A carbon credit is purchased from the Government which will entitle you or a company to produce or generate one ton of CO2 emissions. The purchases flow directly from the company to the government, but if you have excess credits you can sell them to other companies. A good comparison is a fisherman can sell his catch quota if he isn't going to use it all and claw back the cost.
Companies are allocated a certain number of carbon credits annually which may or may not be enough as the Government controlled credit system is designed to reduce the amount of credits issued each year. The Paris agreement was set to reduce Carbon emissions worldwide and countries have to comply by forcing companies to monitor their emissions.
What is a Carbon Offset
This is basically purchased from a company that is removing carbon from the atmosphere through their normal business day. Offsets are available in the open market and are purchased by companies requiring offset carbon credits to reduce their carbon footprint.
As you can see by the above graph that this is going to become big business in the coming years. Generating $400 million last year growing to around $25 billion by 2030 which all depends on the carbon credit price per country. Prices vary, but the prices are expected to come into line as this gathers more momentum.
Tesla sold off Carbon Credits to other car manufacturers in the first quarter of 2021 for a reported $520 million. The price of credits will rise and this could turn out to be a big money maker for Tesla long term.
I have raised this Carbon Emission topic before when discussing the VET token with their VE Carbon partnership with AWS. Just this should highlight how big VET will be in the future as they are seen as the gold standard for monitoring carbon emissions. VET may seem like not doing much right now, but the VE Chain has placed themselves in the right areas to benefit once this takes off. Many investors have no clue what technology VET along with the daily use cases that it is offering. Scary where VET could end up at as the crypto project is leading the way in this field.
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