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Overall, the market for carbon credits could be worth upward of $50 billion by 2030.
(McKinsey & Co.)

Carbon Credits:

 

The International Glasgow Convention obliges countries and industries to reduce CO2 carbon emissions and move to renewable green energies while setting clear goals for each country. Failure to meet the carbon reduction targets could lead to economic sanctions against the country, lowering their international credit rating, or denying credit to polluting companies or countries, and imposing fines.

 

The consensus that producing BioChar and burying it in the ground prevents carbon dioxide emissions into the atmosphere has led to the opening of an economic niche for "investment houses" that trade in carbon credits, namely: polluting industries can "purchase" carbon credit from BioChar producers or trading platforms and thus "offset" their carbon emissions.

 

The common equation is: sequestering one ton of BioChar in the soil, asphalt, building materials, etc. = preventing emissions of approximately 3 tons of CO2 into the atmosphere. The payment per ton of CO2 sequestered is between 75-100 Euros in the European Union, and about $35 USD in the California Cap & Trade marketplace. 

 

The registration and certification process of the manufacturer involves many tests by environmental engineers, regulatory approvals and laboratory tests on the quality of the BioChar product produced as well as on the equipment used to manufacture it. It should be noted that we are the only company in the world whose BioChar is insured by a major US insurance company including the carbon credits it creates. 

More and more companies are pledging to help stop climate change by reducing their own greenhouse-gas emissions as much as they can. Yet many businesses find they cannot fully eliminate their emissions, or even lessen them as quickly as they might like. The challenge is especially tough for organizations that aim to achieve net-zero emissions, which means removing as much greenhouse gas from the air as they put into it. For many, it will be necessary to use carbon credits to offset emissions they can’t get rid of by other means. The Taskforce on Scaling Voluntary Carbon Markets (TSVCM), sponsored by the Institute of International Finance (IIF) with knowledge support from McKinsey, estimates that demand for carbon credits could increase by a factor of 15 or more by 2030 and by a factor of up to 100 by 2050. Overall, the market for carbon credits could be worth upward of $50 billion in 2030.

The market for carbon credits purchased voluntarily (rather than for compliance purposes) is important for other reasons, too. Voluntary carbon credits direct private financing to climate-action projects that would not otherwise get off the ground. These projects can have additional benefits such as biodiversity protection, pollution prevention, public-health improvements, and job creation. Carbon credits also support investment into the innovation required to lower the cost of emerging climate technologies. And scaled-up voluntary carbon markets would facilitate the mobilization of capital to the Global South, where there is the most potential for economical nature-based emissions-reduction projects.

Given the demand for carbon credits that could ensue from global efforts to reduce greenhouse-gas emissions, it’s apparent that the world will need a voluntary carbon market that is large, transparent, verifiable, and environmentally robust. Today’s market, though, is fragmented and complex. Some credits have turned out to represent emissions reductions that were questionable at best. Limited pricing data make it challenging for buyers to know whether they are paying a fair price, and for suppliers to manage the risk they take on by financing and working on carbon-reduction projects without knowing how much buyers will ultimately pay for carbon credits. In this article, which is based on McKinsey’s research for a new report by the TSVCM, we look at these issues and how market participants, standard-setting organizations, financial institutions, market-infrastructure providers, and other constituencies might address them to scale up the voluntary carbon market.

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