Newrl Creates Carbon Credits to Offset greenhouse gas emissions into the Atmosphere
Carbon credits are a tradeable unit of measurement that differs from carbon offsets. These credits are only present in jurisdictions that use a “cap and trade” system, with the governing body creating and allocating them to individual businesses in that area. The ultimate objective of carbon credits is to minimize greenhouse gas emissions into the atmosphere. Each credit represents one tonne of CO2e that a company is permitted to emit. This mechanism entails giving businesses a fixed number of credits that decrease over time, and they have the option of selling any surplus credits to other companies. By offering a financial incentive for firms to decrease their carbon emissions, carbon credits provide a monetary motivation. Even if a business is unable to easily reduce its emissions, it can continue to operate at a greater financial cost.
Carbon credits are founded on the cap-and-trade model, which was previously utilized to decrease sulfur pollution in the 1990s. According to the Environmental Defense Fund, this is comparable to the carbon dioxide emissions generated by a 2,400-mile drive. Businesses or countries are granted a fixed number of credits and can trade them to help balance worldwide emissions.
The Need for reducing levels of carbon and greenhouse gases in the atmosphere
The scientists at the United Nations’ Intergovernmental Panel on Climate Change (IPCC) have demonstrated that heightened levels of greenhouse gases (GHG) in the atmosphere lead to global warming, resulting in severe weather shifts worldwide. Carbon dioxide, a byproduct of burning fossil fuels like coal, oil, and gas, is currently the primary GHG responsible for this. If we can reduce the amount of carbon dioxide released into the environment, we may be able to prevent additional damage to our climate.
The carbon credit market’s magnitude is challenging to estimate accurately due to varying regulations and geographical differences in each market. Nonetheless, one sector of the market, the voluntary carbon market, mainly comprising companies purchasing carbon offsets for corporate social responsibility (CSR) purposes, was valued at approximately $1 billion in 2021, according to some sources.
Newrl Creates Carbon Credits to Offset Carbon Credits
Newrl’s creation of a carbon credit system was a strategic move to mitigate greenhouse gas emissions by establishing a market where companies can buy and sell emissions permits. This system allows us to hold a fixed number of carbon credits, which gradually reduce over time. Any surplus credits can be sold to other companies, generating a financial incentive for emissions reduction. The introduction of carbon credits incentivizes companies to minimize their carbon footprint, as those struggling to achieve emission reductions can still continue operations but with a higher financial burden. Advocates of the carbon credit system contend that it results in quantifiable and verifiable decreases in emissions.
Newrl helped Varaha create carbon credits to be verified by Vera and sold in the global marketplace to offset polluting industries and work towards a cleaner environment. Currently deployed with Farmers’ use cases, we initiated the process with Varaha, as it expressed a keen interest in reducing actual emissions in its value chain. The traceability work and CO2 intensity for each leg of their value chain were already mapped out. There exists a trade-off between prioritizing the largest CO2 contributors versus the most accessible ones. We began with the latter and made significant progress by substituting diesel vehicles with electric ones for transportation, resulting in an immediate “In-setting” of emissions and a 9% reduction in CO2 intensity for the final product. This was the low-hanging fruit.
Newrl then focused on the processing factory, where we connected Varaha with solar panel suppliers to explore renewable electricity sourcing to reduce their scope-2 emissions from manufacturing. This strategy contributed an additional 16% reduction in CO2. However, the most significant CO2 contributor leg is the farmers, who are Varaha’s ultimate suppliers. By encouraging sustainable agricultural practices, we aim to reduce the product’s total carbon intensity by over 40%.
Carbon credits, along with other ESG-related assets, were primarily created to allow large corporations to offset their significant carbon footprints, which contribute significantly to global warming. Although the asset class is esoteric, it has found its place in the market, with its popularity rising and falling depending on macroeconomic conditions. As the world shifts towards a more sustainable future, we can expect the demand for carbon credits and other ESG-related assets to increase in the coming years. The success of carbon credits and ESG-related assets lies in their ability to encourage more significant participation from the private sector. It is vital that companies understand the impact of their operations on the environment and take the necessary steps to reduce their carbon footprint, both for the well-being of our planet and the longevity of their businesses.
