Carbon Credits, Explained

Carbon Credits, Explained

What is a carbon credit?

A carbon credit is a tradable commodity, like a stock, that represents one ton of carbon dioxide that has either been removed from the atmosphere or has been avoided being released into the atmosphere. 

Activities that remove carbon from that atmosphere can be quantified and verified in order to generate carbon credits. Those credits can then be sold and transferred to companies or entities who will use them to offset a ton of carbon dioxide that they have produced. Those credits are then “retired” and are no longer able to be sold or transferred. 

Example of carbon credits: a landowner commits to not cut trees although he/she has the potential to earn by harvesting timber; the landowner generates carbon offsets by growing and maintaining their forest and earns carbon credits; these carbon credits are then registered on Verra and bought by Microsoft.

FAQ: What Are Carbon Credits and How Do They Work? 

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What is a carbon offset?

A carbon offset is the representation of one ton of carbon removed from the atmosphere, or avoided being released into the atmosphere that is verifiable, additional, permanent, and unique. It can be used to match the impact of releasing one ton of carbon into the atmosphere. 

  • Verifiable means that an independent organization has reviewed the project and can vouch that the amount of carbon stored is accurate. 
  • Additional means that the carbon offsets were not awarded for activities that were required to be performed or would have happened without the financial incentive that carbon credits would provide. 
  • Permanent means that the carbon offsets represent carbon that has been removed from the atmosphere for 100 years. Carbon released into the atmosphere lasts for 100 years so to offset that, carbon must be stored for 100 years. Offsets must be unique, meaning that the same activity isn’t being used for multiple different offsets, either under the same standard or under different standards.

Why does a carbon credit have to be registered?

A carbon registry is an organization that has created a series of standards that govern the creation and use of carbon credits. 

If you’re buying a one of a kind item, a baseball signed by Babe Ruth for instance, do you trust the seller immediately and take their word that it’s real? Or would you only buy it if a trusted third-party expert authenticated it first? 

The standards are guidelines to ensure that carbon credits are only created for verifiable carbon reductions, that no activities are double counted, and that all carbon credits are additional. They also ensure that uncertainty and leakage are accounted for, and manage a buffer pool of credits in order to protect against underperformance of projects, or reversals.

How do I earn carbon credits?

Creating a listing on the LandGate website can help you get started. Listing on LandGate alerts developers of carbon projects that you’re interested in working with them. If your land meets their criteria, they will reach out to you and begin the process of implementing a carbon project on your property. 

That will involve measuring or estimating the carbon stocks currently on your property, and projecting future carbon stocks. After a validation and verification process, the standard organization or carbon registry responsible for your project will issue the credits. Your agreement with the carbon project developer will provide the details of how you will receive financial compensation for the carbon credits produced.  

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How can I qualify for carbon credits?

Almost everyone can qualify for carbon credits by using Landgate. Listing your land on our website is the best way to get started; Landgate is the largest marketplace where landowners can list their land or their credits and be seen by buyers and developers. 

The largest barrier to qualification for carbon credits is a pre-existing requirement to manage your land in a certain way. If you are already obligated to not cut your trees or develop your land, you will not qualify for carbon credits under most standards. Other requirements will vary depending on the project type.

What is a carbon registry?

A carbon registry is an organization that has created a series of standards that govern the creation and use of carbon credits. The standards are guidelines to ensure that carbon credits are only created for verifiable carbon reductions, that no activities are double counted, and that all carbon credits are additional. They also ensure that uncertainty and leakage are accounted for, and manage a buffer pool of credits in order to protect against underperformance of projects, or reversals.

In addition to the standards that are developed, the registries develop methodologies that detail the type of activities that can generate carbon credits and how those credits can be quantified.

How does LandGate help with carbon registration?

Landgate has digitized carbon data and automated the creation of detailed reports that help quantify the carbon that can be stored in trees and soils on your property. Those same reports detail the potential income that could be generated under alternative scenarios or development, which can help demonstrate the additionality of carbon credits associated with a project on your land. LandGate is also working with registries to streamline the registration process of carbon offsets generated from American landowners.

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Do I need an easement to earn carbon credits?

No, you do not need to put your land into a conservation easement. Many landowners think that carbon credits are a permanent commitment like a conservation easement. Carbon projects have a minimum length, and can be extended for longer terms if the landowner wants to earn additional carbon credits. There are even programs where landowners can earn carbon credits with one year commitments that may or may not be renewed.

How long is my land committed to a carbon credit program for?

You have control over the time length of your commitment. Project lengths vary, with the most common traditional projects having a length of 20-40+ years. This project length is very onerous, so there is a lot of work going towards developing projects that are shorter, but still produce verifiable carbon reductions. 

Project lengths of 10 years are starting to become more common, and while uncommon, project lengths of as little as 12 months are starting to become available. The 12-month projects that are available are generally much lower paying than the more traditional project lengths. This is a space of active development, and shorter project lengths continue to emerge. 

Do I need to plant trees to earn carbon credits?

No, you can earn carbon credits from existing trees on your property, or from soils on your land.

Do I need a forest to earn carbon credits?

No, you do not need existing trees on your land to earn carbon credits, you can choose to plant trees if you would like, or you can earn credits from your soils or regenerative agricultural practices.

What sort of restrictions are placed on my land when I enroll in a carbon credit program?

What type of restrictions placed on your land will depend on the type of project that is implemented, but some general restrictions can be understood. For forestry projects, clear cutting of the land, developing the land, or managing the forest in harmful ways would be restricted. 

Generally recreational activities like hunting, fishing, birdwatching, or other activities that do not disrupt the forest ecosystem will be allowed. Management activities like selected thinnings, controlled burns, and other actions that support forest health will still be permitted. 

For soil projects the major restrictions are placed on tilling the land, avoiding developing the land, and avoiding management practices that degrade the soil, enhance erosion, or deplete soil carbon. Grazing animals and other agricultural activities should not be restricted.

How many carbon credits can I earn?

It is hard to give a general answer, as carbon accumulation will change depending on the specific conditions on your land. Mentioned below, these all have an impact on how much carbon your land will sequester:

  • Forested vs non-forested
  • species mix
  • forest age and density
  • water precipitation
  • soil type 

Generally, non-forested lands should not expect over .5 tons per acre per year, while forested lands will often sequester around 3 tons per acre per year. Check your property on our website for a more specific and detailed estimate.

What’s the minimum acreage I need to enroll in a carbon credit program?

There is no technical minimum acreage, the limits on acreage arise out of the cost of measuring, monitoring, and implementing projects. Traditionally it has not been financially feasible to implement projects on lands under 500 acres. 

As costs to implement projects are reduced, projects on smaller and smaller parcels of land will become viable. Work is being done to reduce costs further, and streamline the project development process, which should allow projects on parcels under 100 acres to be viable. 

What other benefits does storing carbon have?

The practices that lead to increased carbon stored in trees and soils also leads to increased productivity of the land. Carbon storage can provide habitats to many different species and help increase biodiversity, improve water quality, reduce the need for irrigation, and help mitigate flood risk.

Can I earn carbon credits from soils?

Yes, soils managed with the goal of increasing soil organic carbon can sequester carbon and improve soil health.

Can I earn carbon credits with regenerative agriculture?

Regenerative agricultural practices that reduce emissions from cattle or farm equipment are eligible for carbon credits. This can involve manure management, planting cover crops, adjusting post-harvesting practices among other possibilities.

What is greenwashing?

Greenwashing is a term used to describe when companies claim they are working to protect the environment but their actions ultimately still cause harm, their overall impact on the environment is negative, and only countered by small, token efforts to mitigate the damage they do. Often this can happen when companies buy carbon credits that are low quality. Carbon credits that don’t provide a verifiable reduction of carbon in the atmosphere, especially in projects without much oversight.

How does LandGate avoid greenwashing?

LandGate works with American landowners. American landowner carbon offset commitments are very reliable and provide verifiable carbon reductions, making it vital to open the carbon market to American Landowners and finally give American Landowners the opportunity to be paid to conserve and restore American land.

If you’re looking to get paid for the carbon your land is storing, list your property on LandGate to access the largest land resources marketplace and get connected to the most project developers.

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