Carbon credits: The cost of net zero emissions

How Sweden is using carbon credits to go ‘clean’… 

Written by: Giovanni Maddalena

Art by: Yang Xin

What does a country do once 100% of its energy is ‘clean’? Sweden has recently committed to an ambitious goal of net zero emissions by 2045. This doesn’t mean that no carbon dioxide will be emitted, but rather that the total carbon output will be less than the total carbon in. One of the methods they are implementing in order to reduce their carbon footprint takes advantage of carbon credits.

After the formulation of the Kyoto protocol (an agreement between 192 countries to reduce global carbon emissions), the concept of carbon credits was established. This system is defined as ‘a tradable certificate or permit representing the right to emit one tonne of carbon dioxide or the mass of another greenhouse gas with a carbon dioxide equivalent’.

Put more simply, every company is given a quota, an allowance on emissions,  which they should aim to stick to. If, for example, a manufacturing plant produces five tonnes of CO2 in a year, but their allowance is only four tonnes, then they’ve exceeded their allowance by one tonne. If, however, another manufacturing company has the same allowance but only produces three tonnes of CO2, it has an excess of one carbon credit. The ‘greener’ company can sell its carbon credit on.

The idea is that energy demand will keep growing but the carbon allowance of companies won’t, so they must seek out cost-effective ways of reducing emissions using ‘cleaner’ machines or manufacturing practises.

This concept has created a whole new market for trading carbon, which it is estimated will one day be worth trillions of dollars. Whole companies have been set up to ‘create’ credits. Companies who have invested in wind or solar farms will emit negative energy – they’ll essentially create a carbon credit by absorbing an equivalent of one tonne of CO2 and the credit can then be sold off to firms, countries or the public. Some environmentalists are purchasing carbon credits to make up for inevitable toxic activities increasing  their carbon footprint. For example, flying will leave a hefty trail of greenhouse gases behind – you can remove the guilt by buying carbon credits.

The Swedish Energy Agency will have invested ten million credits through green projects, for example, rural India’s ‘productive poo project’ run by Cool Effect. This non-profit organisation is currently charging $10.98 to remove one tonne of CO2 from the atmosphere by providing families in India with biogas generators which reduce emissions into the atmosphere and create clean energy. Each of its 11 current projects is verified by third-party organisations, such as Gold Standard, which certify the emissions removed are fairly stated.

The benefits of carbon credits have been demonstrated by Cool Effect as rural families can really benefit from biogas generators. On top of this, the project’s use of biogas also helps the environment – two benefits in one. Other projects involve rainforest protection and nitrous oxide abatement, meaning that individuals can invest in what they feel most strongly about. Carbon credits, when used effectively, can therefore help poor and marginalised communities and support economic growth, while also having a positive impact on the environment.

However, it is not always so positive: a frequent issue with these organisations is a lack of transparency. In 2016, New Zealand’s government was accused of buying cheap carbon credits from Russia and Ukraine. These credits had no environmental benefits as they made use of loopholes around international rules for carbon trading. The same could be true for anyone claiming to invest your money in ‘green’ schemes: you can often find yourself throwing money into a black hole. To some, carbon credits are simply a way for countries and corporations to ‘greenwash’ – they can maintain their carbon-intensive industries and just pay someone else to fix the damage for them.

The head of environmental markets at Barclays Capital Redshaw recently stated: ‘Carbon will be the world’s biggest commodity market, and it could become the world’s biggest market overall’. In today’s economy we find greed kills the environment; in the future we could find ourselves in a situation where greed becomes green.

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