Climate change is one of the biggest challenges facing humanity. This blog, based on the first chapter of carboncreditcapital.com’s widely respected Climate Change and Carbon Markets 2023 Report, breaks down the key facts into bite-sized chunks to help you get up to speed on the science and potential fixes, with a focus on carbon credits.

Greenhouse Gases Trap Heat and Drive Climate Change

The greenhouse effect is a natural process where gases like carbon dioxide, methane and nitrous oxide act like a blanket, trapping heat from the sun and keeping Earth warm enough to support life. But human activities since the Industrial Revolution have pumped out extra greenhouse gas emissions from burning fossil fuels, agriculture, deforestation and manufacturing.

These extra emissions are dangerously strengthening the greenhouse effect and disrupting the climate system. As concentrations rise, more incoming solar radiation gets absorbed, while less infrared radiation escapes to space. This growing energy imbalance is resulting in rising global temperatures, shifting weather and ocean patterns, melting ice, and more frequent and intense droughts, floods and storms worldwide.

A Truly Global Challenge

Greenhouse gases mix uniformly in the atmosphere – emissions anywhere impact people everywhere. So no single country can solve climate change alone. Mitigating climate risks requires cooperation between governments, corporations and citizens worldwide. But because the harms of climate change are distributed unequally, with developing nations bearing the greatest burdens, it’s challenging to align costs and incentives. Overcoming this collective action problem is key to an equitable and effective climate solution like carbon credits.

What Are Carbon Credits?

Carbon credits are tradeable permits that give the holder the right to emit a certain amount of carbon dioxide or other greenhouse gases. The total amount of credits issued is limited by caps set by regulators to help meet national emissions reduction targets.

Companies can buy credits from the market if their emissions exceed their allowance. The transfer of permits ensures emissions cuts are made most cheaply by incentivizing reductions in sectors where abatement costs are lower. This market-based approach offers flexibility and reduces the overall economic burden of transitioning to a low-carbon future.

For individuals, purchasing carbon credits is a way to take responsibility for offsetting the emissions associated with daily activities that are difficult to avoid, like home energy use, driving and flying. The funds go towards emissions-reducing projects to counterbalance your carbon footprint. Popular offset types include renewable energy, forest conservation and clean cookstoves.

What Are the Effects of Climate Change?

Rising seas

Melting land ice and expanding warmer oceans are causing accelerating sea level rise globally. Coastal cities and islands face risks of flooding and permanent inundation. Between 1901-2018, global sea level rose 20 cm on average. The rate of rise is accelerating.

Hotter temperatures

Most of us can witness that the last decade was hotter than any time in the past 125,000 years, a fact confirmed by 99.9% of all scientific studies conducted on the topic. Our current trajectory guarantees even more heatwaves and less cold snaps. Far from being merely a question of “comfort”, this trend directly impacts the lives of each and every one of us, and global food security as a whole – each additional 1°C of warming decreases grain yields by 10% on average.

Extreme weather

Heavy rainstorms, hurricanes, droughts and wildfires are becoming more intense and frequent due to climate change. One only needs to watch the news on any given day to see how people’s lives are affected worldwide. A warmer atmosphere holds more moisture, fueling more precipitation when it does rain. But it also leads to quicker evaporation and drying between rain events, expanding drought risks.

Shrinking ice

Glaciers and Arctic sea ice are rapidly declining. Since 1980, Arctic sea ice extent has plunged by nearly 50% in summer and fall. Shrinking glaciers threaten water supplies for over 1 billion people worldwide who rely on seasonal meltwater runoff. Melting permafrost damages infrastructure and releases more heat-trapping gases.

Acidic oceans

Increased CO2 absorption makes seawater more acidic, endangering coral reefs and shellfish. Fish populations are shifting as oceans warm, threatening food security for people who rely on seafood.

Biodiversity under threat

Climate change is accelerating species extinction rates. Shifting climate zones will force many organisms to move or adapt. Those that can’t will perish. Nature’s complex web of life will unravel, with ripple effects throughout ecosystems.

Threats to health

Warmer temperatures expand the range of disease-carrying mosquitoes and ticks. Heat waves cause more premature deaths. Wildfires lead to respiratory illnesses. Food and water shortages will undermine nutrition and food safety. Allergies will worsen with more pollen production.

Climate conflict

Scarce resources like food, water and shelter increase conflict risk after climate disasters and in regions suffering water shortages. Millions of climate refugees, such as those escaping the Sahel region in Africa, will further aggravate political tensions between the global North and South. The Syrian civil war is an example of the horrors and suffering we can expect to witness.

Economic impacts

Extreme weather causes billions in damage to homes, businesses and infrastructure. Fighting climate change will require massive investment. But inaction carries an even higher price tag – up to 20% GDP loss by 2100. Transitioning to clean energy now makes economic sense.

Which Activities Produce the Most Emissions?

The top emitting sectors globally are:

• Electricity/heat (31%)
• Agriculture (11%)
• Transportation (15%)
• Forestry (6%)
• Manufacturing (12%)

Within these sectors, the biggest contributors are:

• Coal power
• Gas power
• Oil/petroleum
• Industrial processes like cement and steel production
• Deforestation and livestock

The United States, China and India generate nearly half of all carbon pollution.

We Can Solve This – Here’s How:

Though daunting, the climate crisis is not hopeless.

The technologies exist today to transition our energy, transportation, building and industry sectors away from fossil fuels and towards clean options like wind, solar, electric vehicles, hydrogen fuel cells, nuclear power, and next generation biofuels.

Natural climate solutions like forest protection and climate-smart agriculture can remove large amounts of carbon from the atmosphere cost-effectively while providing environmental and social co-benefits.

Key solutions include:

• Massively scaling up wind, solar, nuclear power, electricity transmission grids, battery storage and energy efficiency.
• Phasing out coal power and transitioning to electric vehicles.
• Slashing methane emissions from oil/gas operations.
• Protecting and restoring forests, wetlands, grasslands and farmlands to absorb CO2.
• Investing in innovative new technologies like carbon capture and green hydrogen.
• Putting a price on carbon through cap-and-trade schemes and carbon taxes to incentivize emissions reductions industry-wide.
• Expanding the voluntary carbon credit market so individuals and companies can offset their emissions.

By making deep emissions cuts now, we can still limit warming to 1.5°C and avoid catastrophic climate change impacts. But action must start immediately – delay risks irreversible harm. Now is the time to get informed, change habits, contact elected officials and get involved. Our future depends on it!

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.