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Almost every large company is claiming to be “carbon-neutral.” They’ll happily get up on a platform and declare that they’re “already net-zero” or “well on the road” if given a chance.

How then can the same businesses that annually release tens of thousands of tons of CO2 into our atmosphere assert that their influence on the environment is negligible? By paying to lower the quantity of CO2 in our atmosphere, they compensate for their emissions.

Unsurprisingly, an entire industry has been created to support this. But it’s unclear, and many people say it’s now stuffed with nonsense. Many business activities have been accused of “green-washing” as a result, and this is not accurate. The voluntary carbon market has to be addressed since it is inefficient.

What is the market for voluntary carbon?

There are two types of carbon markets: voluntary and compliant. The compliance industry is governed. By imposing restrictions and establishing financial incentives, regional, national, or worldwide regimes aim to lower the amount of carbon that businesses produce. They mostly employ cap-and-trade or a carbon tax.

With cap-and-trade, the overall quantity of carbon that a certain industry is allowed to release is limited, and specific emission levels are permitted by way of permits. Businesses can exchange these permits for money, making money when they don’t utilize their whole allotment and spending money when they need to acquire more. It’s easier to pay a carbon tax by emitting carbon. Then there is the voluntary market, where “carbon credits” are traded.

Carbon credits are produced by initiatives that safeguard the environment (via “avoidance” measures like preserving rainforests and halting the release of carbon from felled trees, or “removal” measures like carbon capture). A corporation can buy credit to offset the pollution they create for every comparable quantity of carbon that these programs save.

But the main difference between the two markets is that the voluntary market is unregulated and voluntary carbon credits do not contribute to the regulatory bodies’ emission ceilings.

What solutions does technology offer us?

Today’s technology can provide supply and demand with greater and more democratic access to the voluntary market. They will reduce the need for arbitrage-seeking intermediaries and promote greater support for initiatives with greater social and environmental benefits over less costly ones.

As we have seen, there are several possibilities for new technology players to improve the system. If done well, voluntary offsetting will go a long way toward helping us achieve the goals set out in the Paris Agreement.

There is undoubtedly a need for more technology companies to take on the mission of rescuing our planet, as technology is ultimately the key to the voluntary market’s ability to combat climate change truly.


With information from: How tech can fix the voluntary carbon market, by Stephan Füchtenhans