Carbon credits as market-based mechanisms for climate mitigation: Opportunities, challenges and future perspectives

Abstract

Carbon credits are a promising market-based tool for combating climate change, biodiversity loss and ecosystem degradation, three of the most pressing environmental problems currently facing the global environment. Carbon credit schemes have stimulated investments in renewable energy, forestry, sustainable agriculture, soil carbon management and decreased emissions by putting a monetary value on greater carbon sequestration and reduced emissions. The public and commercial sectors can now work together to combat climate change, facilitated by mechanisms that have helped close the gap between environmental responsibility and financial viability. There must be rigorous science, open government and sound policy frameworks for carbon credits to succeed. They have not yet reached their full potential due to ongoing issues with additionality, the permanence of sequestration, leakage risks and discrepancies in measuring, reporting and verification (MRV). Without robust regulations, carbon markets risk becoming more symbolic than practical. However, carbon credits provide a scalable and adaptable alternative that may supplement direct emission reductions and support sustainability objectives in the long term when well planned and executed. Carbon credits are an essential component of global climate policies, as they promote sustainable land-use practices and reduce atmospheric concentrations of greenhouse gases.