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  • Soumya Saraf

Clearing the Air: The Controversy Surrounding Carbon Credits

In the up-and-coming sustainability-driven world, a critical concept that exists is that of carbon credits. Carbon credits are financial instruments that curb or reduce greenhouse gas emissions and combat climate change. It represents a unit of measurement for one ton of carbon dioxide or its equivalent greenhouse gases, such as methane, that has been sequestered, or removed from the atmosphere.


The system of carbon credits is incentive-driven. Companies and governments are expected to curb or stop their emissions in exchange for the money they earn through carbon credits. The system operates on the principle of cap-and-trade’ or ‘emissions trading’. A regulatory body (Bureau of Energy Efficiency) sets a limit or cap on the total amount of emissions allowed within a specific jurisdiction or sector. The price of a credit is determined by market demand or factors such as scarcity of credits.

Problems with Carbon Credits

Carbon credits are often seen as a win-win solution. Companies can reduce their emissions without having to make changes to their operations, and project developers can generate revenue by reducing emissions. However, there are several problems with carbon credits that make them a poor solution to the climate crisis.

  1. Carbon credits allow polluters to continue polluting: The primary issue with carbon credits lies in their allowance for continued pollution, by enabling polluters to sidestep the responsibility of reducing their emissions. Instead of implementing measures to cut down on their pollution, companies can opt to purchase carbon credits from other entities or projects. This practice results in no net reduction in overall emissions. This concern is particularly alarming in India, where coal-fired power plants significantly contribute to air pollution and greenhouse gas emissions. Given that these power plants are major contributors to climate change and its adverse effects, allowing polluters in India to offset emissions from such sources poses a significant challenge. In this scenario, there's a risk that companies won't feel compelled to transition to cleaner energy sources, as they can simply buy carbon credits to offset their emissions, even while continuing heavy pollution. Moreover, carbon offsets present additional challenges. Verifying actual emissions reductions achieved by carbon offset projects is often intricate, introducing the possibility that polluters may acquire carbon credits from projects that do not genuinely reduce emissions. This further complicates the efficacy and reliability of the carbon offset system.

  2. Carbon credits are difficult to verify: Another issue associated with carbon credits lies in their verification process. Assessing the genuine extent of emissions reductions achieved through carbon offset projects often proves to be arduous. This difficulty in accurate measurement raises concerns about the potential scenario wherein companies may purchase carbon credits from projects that fail to reduce emissions genuinely. For instance, a company might assert that it is offsetting its emissions by planting trees. However, the effectiveness of this offsetting strategy is questionable, as the trees may either perish or be prematurely cut down, undermining their ability to absorb sufficient carbon, and offset the company's emissions as intended.

  3. Carbon credits are not a long-term solution: Addressing the climate crisis requires a shift away from viewing carbon credits as a sustainable long-term solution. Achieving the imperative net-zero global greenhouse gas emissions by 2050 (Fuss et. al, 2017) demands a more comprehensive approach, as carbon credits alone are insufficient.

Even if carbon credits were effective in curtailing emissions, their viability is compromised in the long run. The finite availability of carbon credits juxtaposed with escalating demand due to rising emissions implies an inevitable surge in their cost. This escalating price trajectory renders carbon credits unaffordable for many companies, negating their role as a sustainable solution.

Recommendations and Conclusion

Carbon credits emerge as an inadequate solution to address the climate crisis, permitting polluters to persist in their harmful activities. Their problematic nature lies in being hard to verify, potentially leading to unintended consequences, and lacking long-term efficacy.


Rather than leaning on carbon credits, a more effective strategy involves prioritising emission reductions at the source. This entails transitioning towards a clean energy economy, enhancing energy efficiency, and curbing our reliance on fossil fuels. These actions represent the sole means to avert the severe consequences of climate change. Beyond the already outlined concerns, additional professional considerations should be considered when assessing carbon credits. The market for carbon credits is intricate and rapidly changing, necessitating continual awareness of the latest developments for informed decision-making. Furthermore, a notable lack of transparency and standardisation in the carbon credit market complicates comparisons and quality assessments. A heightened risk of fraud underscores the importance of sourcing carbon credits from trustworthy entities.


Considering these challenges, organizations and individuals should refrain from relying on carbon credits for emission offsetting. Instead, the focus should be direct emission reduction through investments in renewable energy, energy efficiency, and sustainable transportation. Additionally, advocating for policies promoting a transition to a clean energy economy offers a more sustainable and impactful approach.


  1. Fuss, Sabine, Jan C. Minx, (2017) et al. "Net-Zero Emissions: The Crucial Role of Negative Emissions Technologies." Annual Review of Environment and Resources, vol. 42.

About the Author

Soumya Saraf is a second year BA Economics student at the Jindal School of Government and Public Policy. She is deeply engaged in sustainability and is committed to seeking out sustainable-driven solutions.


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