In the face of the challenges of climate change, carbon credits have become a key tool for accelerating the transition toward more sustainable economies. But what exactly are they? How do they work? And what role can Latin America play in this market?
In this article, we explain clearly and simply what carbon credits are and why they can represent an opportunity for businesses, governments, and entrepreneurs in the region.
What is a carbon credit?
A carbon credit represents one ton of carbon dioxide (CO₂) that has been avoided or removed from the atmosphere thanks to an environmental protection project. For example, reforestation, a renewable energy plant, or a methane capture initiative.
These credits can be bought or sold in the so-called carbon market, as a way to offset emissions that cannot be immediately avoided.
Why do carbon credits exist?
The voluntary carbon market is emerging as a way to channel funding toward projects that help mitigate climate change. Companies that are not yet able to reduce their emissions by 100% can offset a portion by supporting these types of initiatives.
Far from being a “license to pollute,” offsetting is part of a comprehensive approach: First you measure, then you reduce, and what cannot be avoided is compensated for..
What types of projects generate credits?
Carbon credits can come from a wide variety of initiatives, such as:
- Forest conservation or restoration, avoiding deforestation (REDD+),
- Renewable energy, such as solar, wind or hydroelectric,
- Capture of greenhouse gases, such as methane in landfills,
- Regenerative agriculture, with sustainable practices,
- Waste management and composting,
- Clean kitchens to replace polluting sources in rural areas.
Latin America plays a leading role in many of these projects, with enormous potential for local generation and benefits for communities.
What makes a loan reliable?
A carbon credit must be:
- Additional: the climate benefit would not have occurred without the project,
- Measurable and verifiable by an independent entity,
- Permanent, that is, with low risk of reversal,
- Only, to prevent it from being counted more than once.
Projects are registered and certified under standards such as Verra (VCS), Gold Standard, among others, which guarantee the quality of the credits.
What types of credits exist?
- Avoided carbon credits: when a project prevents a future emission, such as protecting a forest.
- Removal credits: when a project removes carbon from the atmosphere, as occurs with reforestation or direct capture technologies.
Both types are valid, although there is growing interest in those that eliminate carbon, due to their long-term potential.
How much does a carbon credit cost?
The price varies depending on the type of project, certification, region, and associated social impact. It can range from a few dollars per ton to $15, $30, or more, especially for projects with additional benefits for communities or biodiversity.
There's no one-size-fits-all price. That's why it's important to seek expert advice.
What benefits does it bring to a company?
- Move towards the climate neutrality,
- Reduce reputational risks,
- Comply with ESG standards and sustainability reporting,
- Access new markets or incentives,
- Support local projects with positive impact.
Please note:
Can a company stop reducing its emissions if it buys credits?
No. Compensation does not replace downsizing. It's a complement while we move toward a deeper transition.
What is the difference between the voluntary and regulated markets?
The regulated market is defined by laws or public policies. In the voluntary market, companies participate by choice, as part of their environmental or strategic commitment.
What happens if a project fails?
Certification standards include mechanisms for replacing credits if problems arise (such as wildfires), and require risk management plans.
How to get started?
If your organization wants to participate in the carbon market, DelPlata Green can help you:
- Measure the carbon footprint,
- Define a reduction and compensation strategy,
- Buy credits verified and aligned with your goals,
- Or even, sell credits, if you lead an eligible project in the region.
🌱 Are you interested in receiving advice on the carbon market in Latin America?
Contact us and we help you take the next step on your journey toward sustainability.