Carbon credits are an essential tool for businesses that are looking to transition to net zero operations and offset their carbon footprint. However, the process of buying credits – especially figuring out which credits to buy – can be time consuming and challenging. In this article, we’ll cover the main ways your company can buy carbon credits. We’ll also show you how to use Abatable to easily purchase high-quality credits.
Introduction to carbon credits
A carbon credit is a certificate which corresponds to a ton of carbon dioxide removed or reduced from the atmosphere. Credits are developed through the activities of project developers and issued by third-party verifiers.
Buying credits should be one aspect of a robust decarbonisation strategy. As we’ve discussed, offsetting emissions with credits is a great short-term step towards becoming carbon neutral. A long-term solution towards net zero (or even climate positive) should include short and long term science-based targets that increase efficiencies, lower real emissions, and continue relying on offsets for the hard-to-abate emissions.
Carbon Credits for Individuals
Just like with businesses, an individual seeking to offset their carbon footprint should first calculate how much carbon they consume. Here is a helpful link to get started. Also like with businesses, the individual on this journey towards personal net zero should stay vigilant about the quality of the offsets they purchase.
Calculate your carbon footprint as a business
In most cases your business would need to calculate your carbon footprint and plan for reducing it before buying any carbon credits. There are multiple methodologies and tools that assist in this process. Large business with complex supply chains may need to hire external auditors to review and estimate their carbon.
For small businesses we recommend Normative's free carbon calculator. It is spend-based and gives much more granular and accurate estimate when compared to just looking at Scope 1,2 travel and office equipment.
Buying Carbon Credits as a Business
There are three main ways that businesses can purchase carbon credits:
- Directly from project developers
- Through carbon marketplaces
- Via intermediaries
Purchasing credits directly from project developers
When businesses buy credits directly from developers, they ensure that most of the value of the credit goes directly towards the project, rather than to intermediaries. This is a great benefit of buying credits directly, as long as the buyers can verify the quality of these credits and are happy with the associated risks of procuring directly from a project developer.
Many project developers don’t sell their credits directly or only work with very large buyers. Setting up the processes and infrastructure to sell directly is not trivial and many developers choose to outsource this to third parties. In addition, direct deals often involve contracts with complex structure which require thorough due diligence and legal expertise. These contracts should be designed to protect you from different risks including potential non-delivery or under-delivery, especially in the case of forward purchases.
Most business purchasing credits also lack the in-house capacity to verify their quality claims. Projects often use complex methodologies which require technical expertise and thorough evaluation.
Finally, buying all credits from a single project developer also means that your company is not diversifying the risk of the project failing due to external factors. In order to diversify businesses would have to cultivate relationships with multiple project developers, which can be time and resource intensive to do in-house.
Purchase from carbon marketplaces
The second option for purchasing credits is from carbon marketplaces. Marketplaces are quick and easy to use, provide the buyer with a variety of projects, and are typically more flexible with the volumes purchased than a broker (meaning they can cater for smaller volumes).
The risk of marketplaces is the same as what we’ve mentioned above: quality assurance of the credits. Marketplaces should provide you with a additional verification steps to help assess the projects and developers, removing any uncertainty over the quality of what your carbon credits.
Procure carbon credits through intermediaries
The last path for a business looking to procure carbon credits is to go through an intermediary. There are different types of intermediaries that provide a wide range of services suitable for different buyers. These include consultants, trading platforms and procurement platforms. Intermediaries can offer credits sourced directly from developers, acquired through brokerages or marketplaces or even from other intermediaries.
Consultancies can advise the company on the quality of the credits and work with them on a portfolio that fits their requirements. Trading platforms on the other hand provide flexibility on the volume of credits purchased, but there’s generally limited transparency into the credits available and corporates may not receive enough information or support to make a procurement decision.
Procurement platforms provide a flexible way of sourcing credits but those can come at a higher cost and with additional fees. This method is usually most appropriate for companies with higher credits needs (10,000+) or looking for long term offtake agreements. At Abatable we offer carbon procurement services and can help you source bespoke carbon portfolios.
How to purchase credits through Abatable
At Abatable we have built a procurement platform that helps companies with a wide range of offsetting requirements. Businesses can purchase high-quality offsets to offset their hard-to-abate emissions and maximise the social impact of their climate contributions.
Carbon procurement for larger companies
On the other hand our procurement services cater to companies with large offsetting requirements (10 000+ tons of CO2 equivalent) and complex agreements, usually looking for long term offtake agreements.
Companies can run a tailored tender process for their complex procurement needs. They get access to more than 1000 project developers and rely on our team’s expertise to assist them through the process. Companies still transact directly with developers but do it with our support and minimise risks.
Despite buyers’ preference of purchasing directly from project developers, buying carbon credits still involves low project transparency and carries the risk that you will buy low-quality offsets.
Source: BMO Capital Markets Report
We started Abatable to solve this problem. We help companies select high-quality carbon credits, leveraging a proprietary framework to evaluate and score carbon project developers and their underlying pipeline of credits. Get in touch if you want to find out more about our marketplace and procurement services.