What is that?

In theory, these credits are a way for individuals and companies to offset their emissions from carbon-intensive activities, like flying.

But can carbon credits really slow down the climate crisis?

It might sound like all hype, but carbon credits are becoming increasingly popular.

By 2050, the demand for them could explode by a factor of 100.

Carbon credits are essentially tradable permits or certificates that give you the right to emit 1 metric ton of carbon dioxide or any other equivalent greenhouse gas.

And these credits can be traded on two types of markets: mandatory and voluntary.

A mandatory, or compliance market grants governments and companies a fixed number of credits.

This allows regulators to set a cap, or an upper limit on the amount of carbon or other similar greenhouse gases a business can produce.

These credits can be bought and sold so that companies that gobble up their allowance of carbon emissions, can purchase credits from companies that have some of theirs left to spend.

This is how the EU's Emissions Trading System works.

But most of us are more familiar with voluntary markets.

While they're often called credits, these markets actually deal in carbon offsets, like the ones that individuals can buy from airlines and rental car companies.

With voluntary markets there is no fixed limit on the number of credits that can exist, and the money used to purchase these offsets funds projects that reduce greenhouse gas emissions.

These projects can range from promoting cleaner-burning stoves in developing countries, to evaluating better carbon capture technologies, to reforestation projects.

So far, this seems pretty straightforward.

But actually, the market is kind of like the wild, wild west!

For starters, there is no international standard that accounts for all these voluntary carbon credits.

And while there are a number of registries that track carbon offset projects and issue permits, not all of them are as reputable.

Reputable meaning that 1 carbon credit purchased actually represents 1 metric ton of CO2 being removed.

As many as 60% of all carbon credits in the market fail to do this.

So where are those credits coming up short?

Well for one, the emissions each credit represent are not being permanently removed.

Reforestation has been a popular way to offset carbon emissions.

But recently fires in the American West caused some forestry-offset projects to go up in flames, releasing stored carbon back into the atmosphere.

However, capture technologies that store carbon dioxide in rocks might be more permanent.

Also, for carbon credits to work, the greenhouse gas reductions they represent need to be additional, meaning any project they fund would not have been possible without them.

For example, if the construction of a wind farm is required by law, it's not additional because it would've happened anyway and the purchase of any credits for its construction would be pointless.

Sometimes, a credit is claimed twice; once by the project doing the carbon removal, and a second time by the country the project was developed in.

Brazil, for example, argues that efforts to protect their forests should be able to count towards national emissions targets, and that they should still be able to sell credits for those protected forests.

This "double-counting" undermines confidence in the system, and even makes greenhouse gas emissions worse.

The money associated with carbon credits can also cause some groups to report carbon savings that aren't real.

Mass Audubon is an organization that protects nature. It's sort of their thing.

But in 2015, they earned 6 million dollars selling carbon credits, after suggesting that they would log 9,700 acres of their own preserved forest.

If this nonprofit received credits for forests that were never truly in danger, does it really reduce carbon emissions?

In some cases, heavily-polluting companies can use carbon credits to make it seem like they're doing more good than they actually are, a move environmentalists call greenwashing.

Occidental Petroleum was called out by watch groups for doing this when they rebranded their product as "carbon-neutral oil," even though it's just normal oil offset by carbon credits.

Despite all their problems, carbon credits could still work.

Some companies are combining satellite imagery and AI to verify that forestry offset programs are living up to their carbon sequestration claims.

And in June of 2021, the US Senate passed the Growing Climate Solutions Act to help farmers purchase and sell high-quality credits.

In 2020, carbon credits offset 210 million metric tons of CO2.

That's a tiny drop in the bucket compared to the nearly 39 gigatons emitted by human activity in 2020.

Like a credit card, we can't pay off the minimum balance every month and still expect to clear our carbon debt.

In the future, we're going to have to get really creative in how we store carbon.

Check out this video on how scientists are using CO2 to create diamonds.

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