The difference between purchasing carbon quotas and using carbon credits lies fundamentally in their purpose and operation.
From the perspective of carbon neutrality, purchasing quotas does not lead to actual emission reductions, whereas carbon credits do. Let’s see why!
Carbon Quotas: Regulated Market (Compliance Market)
Carbon quotas are part of state or international emissions trading systems (ETS – Emissions Trading System) and apply to large emitters who are required to purchase emission allowances if they exceed the permitted level.
- Limited quantity: Authorities (e.g., EU ETS) issue a predetermined amount of quotas.
- Trading: Companies can buy and sell these quotas among themselves, essentially trading pollution permits.
- Does not directly reduce emissions: When a company purchases a quota, it only acquires the right to emit but does not contribute to financing new climate protection projects.
Why is it not suitable for carbon neutrality? Since quotas operate within a predetermined total amount of emission allowances, purchasing them does not reduce global emissions. A company buys a quota, but this does not result in actual environmental benefit—it merely shifts the allocated emission allowance from one entity to another.
Carbon Credits: Voluntary Carbon Market (VCM – Voluntary Carbon Market)
Carbon credits are certified units that represent actual emission reductions or carbon dioxide sequestration. These are generated by projects that actively reduce the amount of carbon dioxide entering the atmosphere (e.g., forest conservation, soil sequestration, fertilizer replacement, renewable energy investments).
- Real reduction or sequestration: Carbon credits come from activities that genuinely mitigate greenhouse gas emissions.
- Additional financing: Revenue from sales can be used to fund new climate protection projects.
- Voluntary market: Purchasing is not mandatory but helps companies achieve carbon-neutral operations.
Why is it suitable for carbon neutrality? Since each carbon credit represents a real and verified emission reduction or carbon dioxide sequestration, using them allows an organization to effectively offset its own emissions. For example, if a company emits 100 tons of CO₂ and purchases 100 carbon credits, it indirectly finances the sequestration or replacement of 100 tons of CO₂.
- Carbon quotas → serve only regulatory purposes and do not reduce global emissions.
- Carbon credits → result in actual emission reductions or carbon dioxide sequestration, making them suitable for carbon neutrality.
Therefore, if a company aims to achieve carbon neutrality, purchasing carbon quotas is not a solution, but using properly certified carbon credits is.
