Balancing Emissions: Tech Giants Eye Carbon Credits to Power the Path to Net Zero

Introduction:

A growing number multi-national companies, now including tech giants Meta and Netflix are expressing interest in backing a Carbon Credit scheme. This comes as companies seek to balance increasing emissions from the introduction of data centres and artificial intelligence – two emission-heavy services they’re looking to expand – while adhering to and achieving net-zero commitments aimed at limiting global warming to 2°C above pre-industrial levels.

Carbon Credit: A carbon credit represents 1 metric tonne of carbon dioxide that has been reduced, removed or avoided by a project/programme.

The idea:

A Carbon Credit trading scheme would activate the private sector within a capitalist market to engage with climate change and drive net-zero targets.

A Caution:

The use of Carbon Credits must be a secondary action against Climate Change. First, a company must seek to reduce all abatable carbon emissions, and only when it has exhausted these should Carbon Credits be purchased to counteract unabatable emissions.

Carbon credits must not be used to enable a ‘business-as-usual’ approach, where companies continue heavy emissions but purchase credits to offset them.

Carbon Credit-producing projects have previously faced questions over credibility and integrity due to the limited nature of governance in this sector. This highlights the need to improve regulation and transparency, with legal frameworks to ensure proper oversight and prevent misuse or fraud.

Why get involved:

The push to create a regulated Carbon Credit market will enhance governance over the creation and use of Carbon Credits. This would increase confidence in the market, driving up the use and price of carbon. Legal frameworks might also require companies to prove their efforts in reducing direct emissions before purchasing credits, ensuring the system does not allow companies to shirk responsibility for high emissions.

The market would also help funnel funds into developing nations where many Carbon Credit projects are based. International trade laws and new tax regulations may be necessary to support the cross-border exchange of credits, ensuring compliance with environmental treaties and trade agreements.

As the market for Carbon Credits grows, financial regulations will also need to adapt. Carbon accounting rules, tax implications, and pricing controls will become increasingly important, alongside potential legal risks for companies making misleading claims about their carbon neutrality. Stricter advertising laws and consumer protection measures may be implemented to ensure that companies do not falsely advertise their progress towards Net Zero.

The Carbon Credit market has been one of the key themes of the recent New York Climate Week as it is seen as a powerful tool in the drive towards Net Zero, especially as companies and governments face mounting pressure to take meaningful action.