Can I Sell Carbon Credits?

The answer to this question is more complex than a simple yes or no. The fact is that carbon credits are valued at different prices in the marketplace based on a myriad of considerations including the quality, type, size and geographical location of the project. For this reason, it is important to choose a project that reflects your organization’s ideals, objectives and requirements and that provides additional impacts beyond carbon reduction. Ultimately, the ‘value’ of a carbon credit depends on your individual needs, and the value you place on delivering measurable impact to the world.

A carbon.credit is a commodity that represents the emission of one metric ton of reduced, avoided or removed carbon dioxide (and other greenhouse gases) by a project that is verified to meet certain standards. Carbon credit buyers are either individuals investing in projects for environmental reasons or companies looking to offset their emissions. This is different from a carbon cap and trade market, where companies are capped by government regulation and then have to buy or sell allowances on the public exchange.

There are many different ways that people and companies produce carbon credits, with the most common being reforestation, biofuels, methane capture and energy efficiency projects. Companies that emit a large amount of GHG can create carbon credits by not using their full quota of allowances, which they can then sell to businesses who want to offset their emissions.

As the demand for carbon credits grows, the number of projects increasing to sequester carbon are also growing. Farmers, ranchers and landowners have the opportunity to participate in this new market by offering their land for carbon credits through a process known as carbon trading. Typically, this involves signing a contract with a company to lease their land for carbon offsets.

Carbon credits are purchased by companies seeking to offset their own emissions, or by individuals seeking to invest in renewable energy or other low carbon projects. These projects are vetted and approved through a certification process by independent third parties, and the carbon credits are traded in a private, voluntary market.

To link supply and demand, there are brokers and retail traders in carbon markets, who purchase carbon credits from the suppliers directly, bundle them into portfolios – often in the hundreds or thousands of carbon credits representing an equivalent metric ton of CO2 – and then sell them to end buyers with some commission. In addition, there are some carbon finance companies which also act as both financiers and brokers.

Currently, most of these transactions take place in private conversations or over the counter. However, carbon exchanges such as the Xpansiv CBL and ACX are emerging to streamline the process and make it more efficient by offering standard products that ensure some basic specifications for the credits they trade.

Typically, the landowners involved in these projects have to sign a contract that requires them to follow specific practices on their property for the life of the contract. These might include reporting data and soil samples to the verification agency on a regular basis, and may require a third party to visit the farm for inspection. In addition, some contracts have penalties if the land changes ownership during the term of the agreement.