Carbon Credits

Carbon Credits, Carbon Offsetting, Carbon Streaming? What does it all mean? Below you’ll find an introductory guide to the world of carbon.

Path to Net-Zero

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At least 5 billion tonnes of negative CO2 emissions per year are needed to achieve net-zero.

Momentum behind net-zero commitments has increased dramatically—and for good reason. The Paris Agreement—signed by 196 countries in 2015—set a goal of limiting global warming to well below 2°C, with the ultimate target 1.5°C compared to pre-industrial levels. To achieve this, significant reductions in carbon dioxide emissions and other greenhouse gas emissions are needed. More than 50% reductions in CO2 emissions and 40% in other greenhouse gases are needed by 2030, and ultimately net-zero CO2 emissions by 2050.

Source: McKinsey Quarterly, Climate math: What a 1.5-degree pathway would take, April 2020.

What are Carbon Credits?

A carbon credit is equal to one tonne of carbon dioxide equivalent emissions. Project developers of carbon reduction or removal initiatives may apply for the granting of carbon credits based on how much carbon is either removed or reduced by their project. In return, project developers may sell these carbon credits in the open markets or to world governments and can be used for the neutralization of emissions.

Carbon credits allow emitters to offset their carbon footprint. Carbon credits are a way for entities to compensate for emissions by funding equivalent carbon dioxide savings somewhere else, while they continue the process of making fundamental changes to their emission activities. This is referred to as Carbon Offsetting.

Carbon credits also provide a means of financing the development of negative emissions through nature-based solutions and other projects that remove carbon from the atmosphere and are integral to achieving a net zero future.

Creating Carbon Credits

  • 01 – Project Development

    Carbon projects are designed using an established methodology to measure Greenhouse Gas (GHG) emission reductions and removals

  • 02 – Validation and Certification

    Once a project plan is in place, that plan is scrutinized by an independent third party to validate the project. With third-party validation, the project qualifies for certification with a standard body and allows the project to be registered for carbon credits.

  • 03 – Verification and Credit Issuance

    Project activities are monitored, reported, and independently verified on an ongoing basis and credits are issued by the registry for every tonne of CO2e reduced or removed.

  • 04 – Sale of Carbon Credits

    Credits are sold to corporations or governments and can be retired towards climate commitments.

Carbon Credit Streaming

Stream finance has been used in various industries over the past 40 years—most recently, the model has been applied to the mining industry. The demand for carbon credits creates a source of financing for climate innovators and project developers to scale green markets, conserve critical habitats and develop carbon sinks. Stream financing monetizes the future value of these credits today, allowing project developers to invest and scale their initiatives sooner. Blue Dot is applying this unique business model to the carbon credit market, empowering new and existing carbon reduction and removal projects.

Blue Dot provides a better way to invest in a net-zero future.

Benefits of Carbon Credit Stream Financing

Carbon Credit Streaming offers investors exposure to carbon credits, a key instrument used by both governments and industries to achieve their carbon neutral and net-zero climate goals.

Accelerates Climate Action

Monetizes the future value of a project’s carbon credits

Non-Dilutive to Company Equity

Streams are completed at the project level and are accretive to a company’s net asset value per share

Lower Risk and More Flexible than Debt

Covenant-lite as compared to traditional debt financing

Increases Financing Capacity

Debt and equity capital can be pursued for other financing needs

Partnership Model

Shared risk aligns goals and desired outcomes between parties

Still Have Questions?

There’s lots to learn about the carbon credit industry. Check out our Investor Presentation or contact us for more information.

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