How carbon credits fit into a credible net-zero strategy

The gap between climate ambition and credible action is a familiar challenge for any business with net-zero targets. Even the most ambitious company will continue to emit greenhouse gases as it decarbonises. Tackling Scope 1, 2, and 3 emissions takes time, and in the interim, those emissions continue to contribute to climate change. 

Carbon credits offer one way to take responsibility for the emissions that continue to be released on a company's journey to net zero. This article explores what credits are, what Ongoing Emissions Responsibility (OER) is, and how credits can form an important part of your OER strategy. 

What is a carbon credit?  

A carbon credit represents a verified unit of greenhouse gas emissions reduced or removed from the atmosphere, independently certified against a recognised standard. Credits allow companies to direct finance towards high-integrity climate projects, often in regions and sectors where capital is scarce, in a way that is measurable, transparent, and verified. 

What is OER?  

OER provides a framework for taking responsibility for the emissions that will continue to be emitted on the journey to net zero. Investments within an OER strategy can broadly fall into three categories: 

• Unlocking near-term decarbonisation through capacity building, policy engagement, and sector collaboration 

• Laying the groundwork for long-term net zero through research and development (R&D) and infrastructure investment 

• Contributing to global mitigation now by directing finance towards high-impact projects that deliver verified emissions reductions 

Carbon credits are the primary mechanism for that third category. Within an OER framework, credits serve a specific purpose: taking immediate action to address ongoing emissions, whilst longer-term investments to decarbonise operational and supply chain emissions are underway, but the benefits are not yet realised. 

Where do credits fit into an OER strategy? 

How prominent a role credits play within an OER strategy depends largely on the context of the organisation. Once a carbon fee has been set, organisations can determine how to allocate resources across different forms of climate action within their OER strategy, including carbon credits, direct mitigation activities, R&D and other contributions to global decarbonisation. 

For companies that lack the capacity to devise sophisticated strategies, credits represent the simplest way to take verified climate action today. A company that has made significant infrastructure investments that will take time to materialise may lean more heavily on credits in the interim. An organisation operating in a sector where decarbonisation solutions do not yet exist may focus its OER strategy predominantly on R&D, with a smaller allocation to global mitigation. 

But it is also worth considering the tangible and often underappreciated impact carbon credits actually have in the real world. 

Carbon credits fund climate action where it is needed most, and where it would otherwise not happen. For instance, around 2.3 billion people still cook over open fires, driving deforestation and causing severe health impacts from smoke inhalation. Because domestic cooking sits largely outside the productive economy, it is extraordinarily difficult to subsidise or regulate at scale. Carbon finance is often the only viable mechanism for reaching these communities, and because these projects would simply not happen without it, they are among the most genuinely additional interventions available. 

Forestry and nature-based projects tell a similar story. Many of the world's most critical carbon sinks and biodiversity habitats - forests, wetlands, mangroves - generate no commercial return in their intact state. Without carbon finance, the economic incentive to clear them frequently outweighs the incentive to protect them. Credits make conservation financially viable, channelling private capital into ecosystems that the market would otherwise destroy. 

Looking further ahead, engineered carbon removals, such as direct air capture and enhanced weathering, are essential to long-term net zero but remain too expensive to scale without sustained demand signals from corporate buyers. Every credit purchased today helps build the market infrastructure, the investment case, and the cost reduction curves that will make these technologies mainstream. Companies that invest now are not just addressing their own emissions; they are helping to build the supply the whole world will eventually need. 

While activities such as R&D, policy engagement, and capacity building are enablers of long-term decarbonisation (see our previous blog), carbon credits represent immediate, verified impact in the real world. They also give companies a unique concrete example to point to: a cookstove project in East Africa, a forest protected in the Amazon, a rice farmer in Vietnam reducing methane emissions. The balance between the two should be guided by an organisation's goals and circumstances. They are not in competition; they are different ingredients of a credible corporate climate strategy: each valuable individually, but more powerful together. 

Turning theory into practice 

Understanding the principles of OER is one thing; putting them into practice is another. In Part 2 of this series, published later this month, we will look at how companies can navigate the practicalities and complexities and build a credible OER strategy. Getting this right matters more than ever, as scrutiny of corporate climate claims continues to intensify, but the world needs climate action now.

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