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carbon credits

the market is improving, but still not robust

 how do verified carbon credits work?

carbon credits is a key component in efforts to mitigate climate change and reduce greenhouse gas emissions.

how? done through independent verification against a specific set of rules and methodologies, set under a voluntary carbon standard. with new insurance companies entering the arena, it seems the "trust" issue is going to be managed diligently. 

carbon credits, is set to become very interesting and a key driver to inject real capital to the carbon removal sector. as of q2.2024, we find the concept pretty challenging, as the uptake and interest globally has been vast. we see this calming down during the year, with more professional standards being adhered to.

verified carbon credits

to create carbon credits, a project or activity must be implemented that reduces or removes greenhouse gas emissions.

 

these projects can include reforestation, renewable energy generation, energy efficiency improvements, and various other initiatives aimed at reducing emissions.

emission reduction projects

independent third-party organizations, known as validators and verifiers, assess the project's viability, including CO₂ emissions reductions.

 

validation confirms that the project's design and methods are in accordance with recognized methodologies. verification ensures that the emissions reductions are accurately measured and accounted for.

measurement & verification

the project developer or owner can then sell these carbon credits in the voluntary carbon offset market to individuals, organizations, or companies interested in offsetting their own emissions.

 

buyers purchase these credits as a way to compensate for their own emissions and demonstrate a commitment to addressing climate change.

trading & sales 

the project or activity results in verifiable reductions in greenhouse gas emissions.

 

this can be calculated by comparing the emissions generated by the project to a baseline scenario that represents what would have happened without the project's intervention.

offsetting & emissions

co2 emissions

it´s important to note that the effectiveness of carbon credits in addressing climate change depends on the integrity of the measurement and verification process, the quality of the projects they fund, and the transparency and accountability of the entire system. 

 

various international standards and organizations exist to ensure the legitimacy and credibility of carbon credit programs.

 

it seems the market is finally gaining much more credibility, although this is an ever evolving space and more must be done.

there are several verification agencies, and they all have different ways of assessing and approving a project. verra, gold standard, puro earth, the integrity council and the clean development mechanism are the main players. 

verification

to limit fraud and negligence and increase confidence in the carbon market, the insuring of a carbon credit gives an extra layer of comfort and peace of mind to the buyers of the credits and the financial institutions that may be funding the carbon removal projects.

in the past twelve months many insurance companies  are dipping their toe into the water;  why you may ask? well, estimates state, the market for carbon credits will grow from

$20 billion to $50 billion by 2030.

insurance

so far the market in 2024 has been fairly active, albeit there are still challenges to overcome. it poised for significant growth, with investments potentially reaching $400 billion by 2030.  the sector is expanding as companies engage in selling carbon removal credits and innovative products like biochar.

 

projects that have historically been aiming to avoid or reduce co₂ emissions account for 82% of the offsets market. buyers get a credit for preventing future emissions. the actual removal of co₂ emissions is where the market is now heading. 

the cdr market

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