As the world grapples with the urgent challenge of climate change, carbon credits have emerged as both a promising tool and a controversial mechanism. These seemingly straightforward tool, designed to offset emissions and incentivise green practices, are now a central pillar of global climate policy.
But behind their glossy appeal lies a host of problems that cast doubt on their effectiveness. What exactly are carbon credits, and why are they at the centre of such heated debate?
At their core, carbon credits function as permits to pollute. For every ton of carbon dioxide a company emits, it can purchase a corresponding credit. These credits are typically tied to projects that reduce or remove greenhouse gases, such as reforestation efforts or renewable energy developments.
The system operates within two primary frameworks. Compliance markets, like the EU Emissions Trading System, impose caps on emissions for industries and allow trading of excess allowances. Meanwhile, voluntary markets cater to businesses or individuals seeking to meet their own sustainability goals without regulatory pressure.
On paper, the idea is simple and elegant. Polluters pay, green projects receive funding, and emissions are reduced overall. Supporters argue that this approach provides financial incentives for sustainable initiatives and encourages innovation in green technologies.
Carbon credits, they claim, are particularly beneficial for developing countries, where they often fund critical infrastructure projects such as wind farms and methane-capturing systems. They also offer a practical pathway for businesses that might struggle to cut emissions immediately, enabling them to offset their footprint while transitioning to greener operations.
However, while the concept holds promise, the reality is far more complicated and, in many cases, deeply flawed. Carbon credits, critics argue, can be less a solution and more a smokescreen for continued pollution. One of the most significant issues is that carbon offsets do not equate to actual emissions reductions. Offsets allow emissions to continue, merely shifting responsibility elsewhere. A company claiming to be “carbon neutral” may still pollute as much as ever, it’s just paying someone else to clean up the mess. This practice, often labelled greenwashing, can undermine genuine climate action by creating a false sense of progress.
The quality and integrity of carbon credits also vary widely, casting doubt on their effectiveness. Some projects exaggerate their impact, claiming reductions that might have occurred regardless of the credit.
A renewable energy project in a country already transitioning to green energy, for instance, might receive credits without delivering additional benefits. Even worse, some credits are sold multiple times due to inadequate regulation and oversight, further diluting their legitimacy.
The problems don’t end there. Many carbon offset schemes rely on reforestation projects, but these carry their own risks. Forests planted to sequester carbon may not survive long enough to fulfil their purpose.
Fires, deforestation, or changing land-use priorities can all release stored carbon back into the atmosphere, undermining the initial offset.
This issue of impermanence is compounded by carbon leakage, where reductions in one area inadvertently lead to increased emissions elsewhere. For example, protecting one forest might push logging activities into another.
Equity is another contentious issue. While many carbon credit projects are located in the Global South, the benefits often fail to reach local communities. In some cases, people are displaced or excluded from their land to make way for conservation efforts, perpetuating a neo-colonial dynamic. Wealthier nations and corporations buy their way out of responsibility while poorer communities bear the burden of accommodating these schemes.
Pricing is perhaps the most glaring flaw in the carbon credit system. In voluntary markets, credits often sell for as little as €5 per ton of carbon dioxide. This is far below the €50–€100 per ton that experts estimate is necessary to meaningfully influence behaviour and meet global climate targets. At such low prices, the financial incentive to reduce emissions is negligible, and the system risks becoming more about optics than impact.
Given these challenges, should carbon credits be scrapped altogether? Not necessarily. With significant reform, they could still play a valuable role in the fight against climate change. Stricter oversight and clearer standards, as proposed under Article 6 of the Paris Agreement, could help weed out low-quality credits and prevent double counting.
Greater transparency, coupled with mandatory reporting and third-party verification, would also improve accountability. But even with these improvements, carbon credits should never be seen as a substitute for the hard work of reducing emissions at the source.
Governments and companies must prioritise systemic changes, such as transitioning to renewable energy, electrifying transport, and adopting sustainable practices.
For individuals, the message is clear: don’t let offsets lull you into complacency. Paying a small fee to plant trees won’t erase the carbon footprint of frequent flights or fast fashion binges. Carbon credits may buy us time, but they are not a panacea.
They must be part of a broader strategy that includes meaningful reductions in emissions and addresses the systemic inequities that climate change exacerbates.
As climate change accelerates, carbon credits alone cannot save us. They are, at best, a stepping stone, and a deeply flawed one at that. The real question is not just whether carbon credits work, but whether they are being used as a pathway to genuine change or merely a convenient excuse to maintain the status quo.
The next time you see 'carbon neutral' proudly displayed on a company website, take a closer look. Is this a business truly walking the green walk, or is it simply paying for a cleaner conscience?