Carbon Credits – What are they?

Global warming is boring, isn’t it? We’re constantly seeing new updates on the news, but does it really affect us? Between the arguments of “I’ll be gone before it’s a problem” and “It’s down to the big companies to sort”, it’s hard to find a reason to care. Well, you should care, because global warming isn’t just going to affect the planet; it’s going to affect your business.

The government are rolling out new schemes to make all business carbon neutral by 2050. It might feel like this is a long time away, but it will soon come around. The only question is whether your business will be prepared when it does. So, how do the new schemes affect you? Firstly, it’ll come in the form of tax. Secondly, you’ll be penalised with fines.

But worry not; you’re not going to have to start coasting your car in neutral to lower emissions. Each business and industry is allotted a number of GHG’s (greenhouse gasses) that they can emit each year. The amount of GHG that you are allotted will be measured in tonnes. For example, a property developer might be allotted 100 tonnes of GHG to use each year in their standard operations. Let’s say that this property developer aims to become completely carbon neutral, but to do this means that they must use 120 tonnes of their GHG allocation in the process.

In this situation, the property developer has two options. Option one is to be penalised for the extra 20 tonnes of GHG that they’re emitting. Option two is to pay for the extra 20 tonnes in carbon credits. What is a carbon credit? It’s like taking out a loan against the planet. It’s paying for your business’ carbon footprint and promising to pay the planet back later date by doing something that reduces GHG emissions.

So, does this mean that you now have to start planting trees every time you go over your GHG limit? No, but a carbon credit pays for someone who will, or to do something else that removes carbon from the atmosphere. When you buy a carbon credit the money goes to a project that will benefit the planet. This could be re-wilding habitats, planting trees, helping developing nations or building wind turbines.

Morally speaking, this is great. You’re not just paying a fee for having an unavoidable carbon footprint; you’re giving money to produce a positive outcome for the planet. A cause that the world, and your grandkids’ grandkids, will thank you for. In addition, you can sell carbon credits yourself if you undertake climate positive projects, for example.

Global warming is a complicated issue, and you can expect to hear a lot more about it in the coming months and years. Like all good investments, it’s better to get in ahead of the curve before everybody else jumps on the bandwagon. Doing so can both save, and potentially make, you money.

If you’d like to discover more about the effects of global warming on businesses, then you can do so by contacting me. I’m also working to make businesses more profitable by providing top tips and insights on my YouTube channel. You can subscribe to it using the links below.

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Nathan Winch Private Investor

About The Author Nathan Winch

British entrepreneur and private equity investor with over 12 years experience. Having started, scaled and sold companies in medtech, SaaS and FMCG, Nathan’s specialities include concept commercialisation, supply chain mobilisation, acquisitions and horizontal integration.