Carbon credits offset carbon emissions by storing, reducing or avoiding greenhouse gas emissions. Projects that generate carbon credits must either reduce future emissions or remove existing CO2 from the atmosphere.
One popular method involves reforestation and afforestation projects, where planting trees absorbs CO2 as they grow, effectively removing it from the atmosphere.
Similarly, conservation efforts aimed at protecting existing forests prevent the release of stored carbon, further contributing to emission reduction goals.
Another significant area of carbon offsetting involves investing in renewable energy projects, such as wind, solar, and hydroelectric power, which provide clean alternatives to fossil-fuel-based electricity generation.
Energy efficiency projects also play a crucial role, reducing overall energy demand and the associated emissions by improving the efficiency of buildings, transportation, and industrial processes.
Additionally, methane capture from landfills and agricultural operations converts harmful greenhouse gases into energy, preventing their release into the atmosphere.
Carbon credit systems often operate on a market-based principle, where credits can be bought and sold.
Australian Carbon Credit Units (ACCUs)
Australia's carbon credit scheme creates Australian Carbon Credit Units (ACCUs). Projects earn one carbon credit for every tonne of carbon dioxide or carbon dioxide equivalent (CO2e) stored or avoided by a project. ACCUs are certified financial products that can be sold to the Australian Government or to businesses wishing to offset their emissions.