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Climate change is one of the biggest challenges facing humanity. This blog is based on the 2nd chapter of our Climate Change and Carbon Markets 2023 Report. Here are the key facts to help you get up to speed on the science of climate change and the role that carbon credits will play in a Net Zero future. 

Carbon Credits Critical to Averting Climate Catastrophe

The scientific consensus paints a dire picture – unchecked human-caused climate change threatens catastrophic and potentially irreversible harm to societies, economies, and ecosystems worldwide. If global greenhouse gas emissions continue rising at the current trajectory, we risk triggering self-reinforcing feedback loops leading to runaway climate chaos. This includes deadly heatwaves and droughts rendering large swaths of the planet uninhabitable, collapse of agricultural systems and food supply chains, and flooding of coastal megacities on a scale beyond human adaptation. The window for preventing the worst climate breakdown scenarios is rapidly closing. According to the IPCC, we have less than a decade left to achieve peak global emissions if we hope to avoid breaching 1.5°C warming and maintain a livable climate.

Carbon Credits Can Help Fix the Broken Economics of Climate Change

Greenhouse gases like carbon dioxide are a global ‘public good’ – the atmosphere belongs to everyone. This means companies can freely dump carbon pollution without paying for the damage. It also means that no single company or country is able to exclude itself from the resulting climatic effects. However, experts estimate unabated climate change could cost the global economy over 20% of GDP by 2100 through impacts like property loss, health issues, severe weather, and agricultural declines.

Establishing a dynamic, commoditized global market for carbon credits is an essential step in correcting this market failure and making polluters pay the true cost of emissions. But before we get ahead of ourselves it’s worth discussing:

What are Carbon Credits and Why are they Important?

Carbon credits are tradable emissions permits that put a price on carbon dioxide emissions released by companies. Carbon credits create financial incentives for companies to reduce their greenhouse gas emissions.

In countries with regulated carbon caps, the companies that exceed their allotted carbon footprint threshold must purchase extra credits to offset their surplus emissions. Meanwhile, companies that maintain emissions below their permitted level can sell their excess carbon credits for a profit. This introduces an economic incentive for companies to reduce their carbon footprint. 

Carbon credits are a core element of emissions trading systems and carbon pricing initiatives worldwide. Expanding carbon credits globally is critical to mitigating climate change. 

Using Carbon Credits to Incentivize Emission Cuts

Carbon pricing through tradable carbon credits is an essential policy solution that must be urgently implemented worldwide. Carbon credits create market-based incentives for companies and nations to reduce their carbon footprints and transition more rapidly to renewable energy and low-emission technologies. Well-designed carbon credit programs allow flexible mechanisms for pricing pollution, driving emission cuts, and funding climate change mitigation and adaptation projects globally. This is our last chance to correct course. The time for bold, comprehensive climate action centered on carbon credits is now. 

Using Carbon Credits for Climate Policy

There are two main policy approaches to pricing carbon emissions using carbon credits:

Carbon Cap and Trade

Under cap and trade systems, regulators limit the amount of overall greenhouse gas emissions by setting a cap. Companies receive tradable carbon credits adding up to the cap and must obtain enough credits to cover their emissions. If companies exceed their credits, they must purchase more on the carbon market from those below their allotted amount.

Carbon Taxes

A direct carbon tax sets a price per ton on carbon emissions, which companies pay based on their CO2 output. The tax incentivizes companies to reduce emissions to avoid taxes.
Jurisdictions may use a hybrid system with both an emissions cap and carbon tax to drive emissions reductions. Robust carbon pricing supported by carbon credits offers the most expedient path to mitigating climate change.

Carbon Credits are Essential to Climate Action

Climate change demands urgent action. Putting a fair price on carbon pollution is essential to driving the needed changes at the speed and scale required. Carbon credits offer a flexible, market-based mechanism to incentivize emissions reductions globally. The societal benefits of stabilized greenhouse gas levels far outweigh the costs of transformation. For the sake of our planet and future generations, carbon credits must become a centerpiece of climate policy worldwide. The window for success is closing – WE MUST ACT NOW.

 

To learn more about the state of Climate Change, Carbon Markets and how these affect each and every one of us, contact us for the full report.

 

References and Further Reading:

  1. Drawdown: The Most Comprehensive Plan Ever Proposed to Reverse Global Warming – Paul Hawken
  2. The Uninhabitable Earth: Life After Warming – David Wallace-Wells
  3. This Changes Everything: Capitalism vs. The Climate – Naomi Klein
  4. The Citizen’s Guide to Climate Success – Mark Jaccard
  5. Climate Change: What Everyone Needs to Know – Joseph Romm

Photo by Marek Piwnicki on Unsplash

Carbon Footprint

The Strategic Case for Nature-Based Carbon Investments

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Nature-based carbon investments deserve consideration when they address a specific business dependency and produce outcomes you can measure. Imagine Moonbucks, a global coffee roaster planning next season’s espresso blend. It is considering natural Grade 4 coffee from Jimma, in southwestern Oromia, Ethiopia. Its sourcing decisions affect the roasting schedule and the cash tied up in coffee purchases. Moonbucks needs to understand which measures could protect that supply, what they would cost and how it would judge the results.

1. Define the sourcing problem before choosing a project

Moonbucks needs a dependable component for its espresso blend. Its procurement team wants continuity of volume and an agreed cup profile. Replacing a shipment at short notice could require new sample approval and changes to the blend, and given the schedules for cultivation, processing, and freight delivery, is practically impossible. Moonbucks needs to get this right, and its initial concern is inconsistent deliveries. It commissions an assessment of the supplying farms and post-harvest chain. The questions cover land condition, harvest availability and whether drying or storage problems are affecting saleable lots.

This distinction changes the investment brief. A tree-planting proposal cannot be assumed to fix drying problems. Better storage cannot restore eroded land. The team must establish which problem exists before selecting the response.

CCC’s guide to finding nature-based solutions in your supply chain explains where to look. Here, the next task is to turn a broad concern into a testable proposal.

2. Develop nature-based carbon investments around the actual supply chain

The assessment would trace Moonbucks’ purchases back through the exporter and supplying producer groups. Which farms supply the contracted lots? Who controls land-management decisions? How long does the buyer expect to maintain the purchasing relationship?

Furthermore, Jimma natural Grade 4 cannot be treated as interchangeable with every Ethiopian coffee. Moonbucks would need to test any substitute against its own blend and quality requirements.

Suppose Moonbucks’ assessment identifies an opportunity to maintain shade trees and restore vegetation along exposed streambanks. The IPCC describes agroforestry as a way to store carbon in vegetation and soil, with potential benefits for erosion control and water quality.1 Moonbucks would need local advice on species, growing conditions and maintenance before deciding how these measures fit its sourcing plan.

The proposal now has a defined sourcing connection and a candidate intervention. The next steps are to test its effect on production, assess carbon eligibility and build the financial case.

3. Compare the proposal with other ways to protect supply

WBCSD’s Nature-based Solutions Blueprint recommends comparing nature-based options with other responses across their benefits and costs.2 For Moonbucks, that means evaluating the landscape proposal alongside drying improvements, storage controls and alternative sourcing arrangements.

The product’s natural-process designation matters. Moonbucks should examine the drying and dry-milling chain alongside land conditions. Its team would check storage practices, contamination risks and incoming-lot quality to see whether problems arise before or after the coffee leaves the farms.

The revised proposal might combine land stewardship with separate post-harvest controls. Each component needs its own purpose and budget. A sustainability label should not obscure which activity is expected to solve which problem.

The project develops as the evidence improves. Its scope should follow the diagnosis rather than preserve the first idea unchanged.

4. Establish what the carbon outcome could count toward

Moonbucks’ sustainability team now tests the proposed carbon case separately from the sourcing case. Is the objective a measurable change in Moonbucks’ value-chain emissions, verified credits for separate voluntary use, or distinct outcomes under carefully defined arrangements?

Scope 3 covers value-chain emissions. A purchasing relationship alone does not prove that a farm intervention can be included in Moonbucks’ inventory. The team needs an applicable accounting method, defensible boundaries and evidence supporting attribution.

SBTi’s FLAG Guidance (forest, land and agriculture), version 1.2, says purchased credits used as offsets cannot meet near-term FLAG or energy and industry targets. Eligible land-based removals are subject to accounting requirements.3 Moonbucks needs to test its proposal against those rules before including an outcome in its targets.

For Moonbucks’ Jimma proposal, maintaining existing trees and establishing new vegetation could involve different carbon questions. Specialists must examine the baseline and additionality, meaning what changes because the project proceeds. They must also assess measurement and the risk that stored carbon is lost. CCC’s MRV and additionality article introduces those tests.

Until that work is complete, Moonbucks should not budget an assumed Scope 3 reduction or credit-sale receipt. Direct emissions reductions remain the priority.

5. Build a financial case that survives weaker assumptions

Moonbucks’ finance team would now build a multi-year budget. UNEP’s State of Finance for Nature 2023 compares current finance with the investment needed to meet climate, biodiversity and land-restoration goals.4 The company would cost its proposed activities, farmer participation and ongoing monitoring. Verification, where required, is a separate expense. Maintenance and responsibility for replacing failed plantings must remain visible after the initial establishment budget ends.

Operational benefits need equally careful treatment. If fewer rejected lots reduce emergency purchasing, count that saving once. Do not add “supply resilience” as another financial benefit when it represents the same avoided cost.

Moonbucks should compare a base case with slower benefits, higher implementation costs and no carbon revenue. It should also distinguish production outcomes from quality and shipment outcomes. A single good harvest would not prove that the landscape intervention caused better delivery performance.

A project can remain worth funding even when its carbon case needs more work. That decision must rest on the operational evidence and the company’s objectives, without unsupported environmental claims.

6. Fund a pilot with a clear expansion decision

Moonbucks’ first approval would fund a bounded pilot, rather than commit the entire sourcing program. Before spending, Moonbucks would agree on participating farms, responsibilities and the evidence needed at review.

Its scorecard could track farmer participation, implementation costs and plant survival, alongside accepted coffee volumes and lot-quality results. Carbon measurements would follow the selected method. Farm-level traceability must connect the intervention to the actual sourcing relationship.

Suppose Moonbucks’ review later finds that storage changes explain most quality improvements, while the land measures need longer observation. Those findings would shape the next decision: expand the proven component, adjust the landscape work or pause further spending. They would not justify crediting all improvements to tree planting.

This gives nature-based carbon investments a practical place in a multi-year strategy. Funding increases as the evidence supports it, and the project can change direction before a larger commitment.

Discuss a sourcing opportunity with CCC

Carbon Credit Capital’s nature-based supply-chain investment service uses its Dual-Value Model to examine supply-chain economics alongside potential sustainability outcomes.

Schedule a consultation to discuss your sourcing exposure and the questions to resolve before allocating capital.

Sources

  1. Intergovernmental Panel on Climate Change (IPCC), Climate Change 2022: Mitigation of Climate Change, Chapter 7, Agriculture, Forestry and Other Land Uses, section 7.4.3.3 (Agroforestry).
  2. World Business Council for Sustainable Development (WBCSD), Nature-based Solutions Blueprint, 5 June 2024.
  3. Science Based Targets initiative (SBTi), Forest, Land and Agriculture Science-Based Target-Setting Guidance, version 1.2, March 2026, section 3.1.4, pp. 37–38.
  4. United Nations Environment Programme (UNEP), State of Finance for Nature 2023, 2023.
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Carbon Footprint

How to buy plastic credits, and what to check before you do

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A plastic credit funds the collection of plastic waste in places where no formal system exists to collect it. Each credit represents a measured, independently audited quantity of plastic taken out of the environment or returned to use, tracked on a public registry.

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Carbon Footprint

EU carbon credit claims after 27 September 2026

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EU carbon credit claims changed on 27 September 2026, the day the Directive (EU) 2024/825 began to apply across the European Union. The change is narrow. It changes how a company can talk about the credits it buys. A product can no longer be called neutral on the strength of compensation alone; however, every specific, evidenced statement about what a company measured, reduced, and funded stays fully available.

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