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FAQ
Q1｜ What are carbon credits?
Q2｜ Can carbon credits be traded across borders or used as an investment?
Q3｜Why do different countries have varying carbon credit systems and regulations?
Carbon credit systems differ because each country designs its own emission reduction framework based on economic priorities, policies, and carbon reduction targets. For example:
● The European Union operates the EU Emissions Trading System (EU-ETS), a compliance-based cap-and-trade program.
● In the United States, some states, like California, have their own regional cap-and-trade markets.
● In Asia, countries like China and South Korea have launched pilot carbon markets to meet national goals.
While these systems are independent, many projects align with international standards such as VERRA or Gold Standard for consistency and verification.
Q4｜ Why are there both compliance and voluntary carbon markets?
The two markets serve different purposes:
● Compliance Carbon Markets: Created by governments or regulatory bodies to enforce emission reduction targets. Companies exceeding their caps must purchase carbon credits. Examples include the EU-ETS and California’s cap-and-trade system.
● Voluntary Carbon Markets (VCM): Companies, organizations, or individuals voluntarily purchase carbon credits to meet sustainability or net-zero targets. These markets are driven by corporate social responsibility, investor pressure, and public demand for climate action.
Both markets complement each other, driving climate action across mandatory and voluntary sectors.
Q5｜ What are the features and pricing characteristics of the voluntary carbon market?
The voluntary carbon market enables businesses and individuals to purchase carbon credits outside of regulatory obligations.
● Key Features:
○ Projects focus on emission reduction (e.g., renewable energy) or removal (e.g., reforestation).
○ Credits are verified by independent third-party standards, such as VERRA or Gold Standard.
○ Many projects offer co-benefits, including biodiversity conservation, community development, and ecosystem restoration.
● Pricing Characteristics:
Carbon credit prices in the voluntary market are influenced by:
○ Project type: Reforestation, mangrove conservation, biochar, and others.
○ Project location and verification standards.
○ Vintage: The year when the emission reduction occurred.
○ Additional co-benefits like job creation, ecosystem services, and improved community livelihoods.
Q6｜What are natural carbon sinks in the voluntary carbon market?
Natural carbon sinks are ecosystems that naturally absorb and store CO₂ from the atmosphere. Scientific advancements have led to the development of methodologies that leverage natural processes for carbon sequestration. Common methodologies include:
● Afforestation and Reforestation: Planting trees to absorb and store carbon.
● Mangrove Conservation: Protecting mangrove forests to enhance coastal carbon storage.
● Peatland Restoration: Restoring degraded peatlands to prevent carbon release and improve soil health.
These projects are certified under international standards like VERRA, making the carbon credits available for purchase by businesses or individuals to achieve carbon neutrality.
Q7｜ What is the difference between natural carbon sinks and general carbon reduction efforts?
The main differences are in their approach and project longevity:
● Natural Carbon Sinks: These projects focus on carbon sequestration through natural ecosystems, such as forests, wetlands, and soil. They follow strict sustainability guidelines, prioritize stakeholder engagement, and aim to preserve Earth’s long-term resilience. These projects often have longer durations and higher costs due to their ecological focus.
● General Carbon Reduction: This includes emission avoidance or reduction through technologies like renewable energy, energy efficiency, and industrial process improvements.
The higher price of natural carbon sink credits reflects their adherence to rigorous standards and their role in supporting long-term ecological and community benefits.