Lesson 1, Topic 1
How do carbon markets operate
Carbon markets are designed to be able to operate on different levels: regional, national or international. These mechanisms basically transform emissions reductions and removals into carbon credits, which are tradeable assets.
- Carbon credits are generated by projects that either reduce emissions from their operations (carbon avoidance) or remove existing carbon in the atmosphere (carbon removal)
- These projects need to be certified by governments or independent recognized standards.
- Once the carbon credits have been issued, they can be traded into a marketplace and purchased by buyers (private companies, governments and even individuals) that need or want to offset their emissions.
- The price for carbon credits is established by supply and demand, and it can vary depending on several factors.