Carbon Credits vs Carbon Capture: What’s the Difference?

Carbon Credits vs Carbon Capture: What’s the Difference?

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Grace Smoot

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Carbon credits and carbon capture are two known ways to help reduce global carbon emissions. But they both operate differently and have different implications for your own carbon emissions. So, we had to ask: What’s the difference between carbon credits and carbon capture?

Carbon credits are tradable certificates or permits that set a maximum level of carbon emissions for industries, companies, or countries. Carbon capture is the trapping of carbon emissions just after they’ve been emitted but before they can enter our atmosphere.

In the fight against climate change, how can we tell the difference between carbon credits and carbon capture? Below we will define both terms, identify the key advantages and differences of each, explore how they operate and what impact they have on carbon emissions, and discuss why they are both important in the fight against climate change.

How Are Carbon Credits and Carbon Capture Defined

Carbon credits and carbon capture are two sustainability tools that can help individuals and organizations lower their carbon footprints. But since they are different mechanisms, understanding their differences is important. 

What Does the Dictionary Say About Carbon Credits and Carbon Capture

Carbon credits are tradable certificates or permits that give companies, industries, or countries the right to emit 1 tonne (1,000kg) of CO2 or the equivalent amount of a different greenhouse gas (GHG). 

Carbon Credit: a unit used in carbon trading that represents the right of a business, factory, etc. to release 1000 kilograms of carbon dioxide into the environment”

Cambridge Dictionary

Carbon credits are a form of climate currency, meaning they are subject to supply and demand and can be bought and sold through a cap-and-trade market. This market limits how much total CO2 can be emitted. Cap-and-trade markets became established after the Kyoto Protocol, an international treaty, set a maximum amount of GHG emissions that could be released into the atmosphere, both globally and nationally. 

Each entity operating under a cap-and-trade program is issued a certain number of carbon credits each year. They can purchase more if their emissions exceed what was issued, and they can sell unused credits to other entities if their emissions are less than what was issued. 

But carbon credits are not the only available tool. Carbon capture is another option to reduce carbon emissions.

Carbon Capture: a way of collecting the carbon produced when fuel is burned, so that it is not released into the air”

Cambridge Dictionary

Carbon capture refers to the process of capturing carbon after it is emitted, but before it can enter our atmosphere. After it has been captured, carbon can either be stored deep underground or repurposed into commercially-marketable products. This is referred to as carbon capture and storage/sequestration (CCS).

There are 3 main types of carbon capture:

  1. Post-combustion: After fossil fuels are burned, the CO2 is removed from resulting flue gas.
  1. Pre-combustion: Before fossil fuels are burned, the fuel is converted into a mix of hydrogen and CO2
  1. Oxyfuel: Fossil fuels are burned in the presence of almost pure oxygen, resulting in CO2 and steam as byproducts. 

As of 2020, there were a minimum of 26 carbon capture projects operating globally, with 21 more in early development and 13 in advanced development. Carbon capture has been demonstrated in industrial sectors such as coal gasification, ethanol production, fertilizer production, natural gas processing, refinery hydrogen production, and coal-fired power generation.

What Are the Differences Between and Advantages of Carbon Credits and Carbon Capture

Both carbon credits and carbon capture represent ways in which we can mitigate carbon emissions and global warming. But they are also different methods of climate action with different environmental impacts, making it important to understand their differences.

The main difference between carbon credits and carbon capture is that carbon credits incentivize the switch to greener technology to keep emissions below a set level. Carbon capture targets the carbon that has already been emitted but prevents it from entering our atmosphere.

The following are key advantages of carbon credits:

  • Caps on carbon emissions can be set strictly 
  • Unused credits can be traded to other companies
  • Incentivizes companies to invest in greener technologies 

The following are key advantages of carbon capture:

  • Removes carbon before it enters our atmosphere
  • Can lead to either carbon storage or carbon repurposing

How Do Carbon Credits and Carbon Capture Impact Your Carbon Footprint

Knowing the similarities and differences between carbon credits and carbon capture is important when making a decision of which one to use. 

Carbon Credits Carbon Capture
How are carbon emissions reduced Carbon credits cap how much CO2 can be emitted by an entity. This cap on emissions can be gradually reduced over time, leading to less and less overall emissions. Carbon capture represents direct emission reductions. Carbon is captured after combustion but before it is allowed to enter our atmosphere.
Impact on own carbon emissions Carbon credits do not directly reduce your carbon footprint.  Carbon capture does not directly reduce your carbon footprint. 
Impact on global carbon emissions Carbon credits mitigate the problem, but they do not work at the core issue of reducing overall CO2 emissions. Carbon capture mitigates the problem, but it does not work at the core issue of reducing overall CO2 emissions.
Environmental benefits Carbon credits facilitate the switch to greener energy sources and promote energy independence.  Carbon capture aids in climate change mitigation.
Overall effectiveness in reducing carbon emissions Improper reporting and discrepancies in maximum GHG levels between countries limits carbon credit effectiveness on a global scale.  High upfront costs and low economic incentives limit carbon capture effectiveness on a global scale.

How Do Carbon Credits and Carbon Capture Reduce Carbon Emissions

The goal of both carbon credits and carbon capture is to reduce carbon emissions to mitigate climate change.

  • Carbon credits: Credits represent indirect emission reductions. Putting a cap on emissions and decreasing this cap over time reduces carbon emissions over time, preventing CO2 from entering the atmosphere.
  • Carbon capture: Carbon capture represents indirect emission reductions. Carbon is captured after combustion but before it is allowed to enter our atmosphere.

When you hear the words “carbon credit”, think about the term “allowance”. Carbon credits represent the maximum amount of CO2 an entity is allowed to emit. This cap on CO2 emissions slowly decreases over time, forcing entities to emit less and less CO2 to stay within the boundaries of the cap. Companies with high levels of emissions can continue to operate, but only at an increased cost.

When you hear the words “carbon capture”, think about the word “trap”. Carbon capture still permits the combustion of fossil fuels at current rates, it just traps the emitted carbon before it enters our atmosphere. It can then be stored or repurposed into other materials.

What Impact Do Carbon Credits and Carbon Capture Have on Your Own Carbon Emissions

One of the best ways we can aid in the fight against global climate change is to reduce our carbon footprint. And to do this we first have to reduce our carbon emissions. 

  • Carbon credits: Carbon credits do not directly reduce your carbon footprint. 
  • Carbon capture: Carbon capture does not directly reduce your carbon footprint. 

Carbon credits do not directly reduce your own carbon emissions. Setting a limit on how much carbon emissions are allowed is an indirect method of emission reduction because companies can continue to emit as long as they pay the price. Coupled with direct measures of emission reductions, such as reducing individual energy usage and consumption, carbon credits can become more effective. 

Carbon credits do not directly reduce your own carbon emissions. Capturing carbon emissions after fossil fuel combustion is an indirect method of emission reduction. Knowing there is an option to essentially erase our emissions after we cause them negates any incentive of reducing emissions by our own accord. 

What Impact Do Carbon Credits and Carbon Capture Have on Global Carbon Emissions

Every year we pump over 36 billion tons of CO2 into the atmosphere, fueling climate change. This causes temperature and sea-level rise, melting of sea ice, changing precipitation patterns, and ocean acidification. Carbon credits and carbon capture aim to reduce global emissions and mitigate these negative environmental effects.

  • Carbon credits: Carbon credits mitigate the problem, but they don’t work at the core issue of reducing overall CO2 emissions. 
  • Carbon capture: Carbon capture mitigates the problem, but it does not work at the core issue of reducing overall CO2 emissions.

Carbon credits do not have a significant impact on global carbon emissions. Although they may incentivize companies to reduce their CO2 emissions, the immediate effect of reducing emissions under the cap-and-trade system is to benefit a company’s bottom line. The direct goal of carbon permits is not to reduce greenhouse emissions or support sustainable energy projects, but rather for companies to make money. 

Carbon capture does not have a significant impact on global carbon emissions. Once it has been captured, the most common next step is to store the carbon. In 2021, overall carbon capture and storage installed capacity reached 40 million tonnes per annum. But in order for CCS to contribute substantially in the fight against climate change, installed capacity must reach 5,600 million tonnes per annum. Thus there still remains a substantial gap between what we currently have and what is needed to reduce our emissions to Paris Climate Agreement target levels.

The COVID-19 pandemic triggered the largest decrease in energy-related carbon emissions since World War II, a decrease of 2 billion tons. However, emissions rebounded quickly at the end of 2020, with levels in December ending 60 million tons higher than those in December 2019. This indicates that the earth is still warming at an accelerated rate, and not enough is being done to implement clean energy practices. 

Illustration of annual CO2 emissions globally
Our World in Data: Annual total CO2 emissions

What Are the Environmental Benefits of Carbon Credits and Carbon Capture

Using carbon credits and carbon capture can reduce our consumption of and reliance on fossil fuels (i.e., coal, oil, and natural gas) which can reduce the effects of global warming by limiting global greenhouse gas emissions. But they also come with various environmental benefits.

  • Carbon capture: Carbon capture aids in climate change mitigation.

Carbon credits incentivize companies to switch to greener energy sources including solar, wind, hydro, and geothermal energy. They do not emit CO2, nitrogen oxides, sulfur dioxides, or mercury into the atmosphere, soil, or water. And these pollutants are known to contribute to the thinning of the ozone layer, global sea-level rise, and the melting of our world’s glaciers.

Switching from fossil fuels to green energy also promotes energy independence. Being able to produce your electricity without the aid of foreign countries is an important step in becoming more self-sufficient. 

Carbon capture aids in climate change mitigation because it aims to reduce the amount of carbon emissions entering our atmosphere. Levels of carbon in our atmosphere have increased as a result of human emissions since the beginning of the Industrial Revolution in 1750. Emissions increased steadily to 5 billion tons per year in the mid-20th century before increasing exponentially to more than 35 billion tons per year at the end of the 20th century. The global average amount of carbon dioxide in the atmosphere was about 280 parts per million (ppm) in 1750 but today registers at over 400 ppm. Carbon capture can help prevent these levels from increasing even more.

How Effective Are Carbon Credits and Carbon Capture in Reducing Carbon Emissions

Carbon credits and carbon capture can be effective at reducing carbon emissions under certain conditions.

Carbon credits have faced criticism because most industries lack the technology that monitors and determines their amount of CO2 emissions. This makes it easier for companies to cheat on their emissions reports and say they are emitting less than they actually are. Also, different countries have different standards and caps for CO2 emissions. If the cap is set too high, then companies are not incentivized to reduce emissions. But set the cap too low, and companies will be overly burdened to reduce emissions. And the extra cost will be passed down to consumers as a result.

Carbon capture is a reactive, rather than proactive, way of dealing with emissions. In this manner, we can continue to use fossil fuels at an accelerated rate. It is also expensive to implement, and there will be little economic incentive to use it until the cost of emitting carbon rises enough to prompt behavioral changes.

Why Are Both Carbon Credits and Carbon Capture Important to Fight Climate Change

Carbon credits and carbon capture are important to fight climate change because they are both ways to reduce carbon emissions. This mitigates the effects of climate change, which has a positive cascade effect on public health and plant and animal diversity. In addition, it boosts the global economy and leads to innovative, more environmentally-friendly solutions.

However, carbon credits and carbon capture should not be used as a panacea for climate change. Relying on credits solely is impractical because the immediate effect of reducing emissions under the cap-and-trade system is to benefit a company’s bottom line. And relying on carbon capture solely is impractical because it is a reactive rather than proactive way of dealing with emissions.

In the long term, direct methods of carbon footprint reduction are much more effective. Reducing your household, travel, and lifestyle carbon footprint can go a long way in the fight against climate change!

What are Better Alternatives to Carbon Credits and Carbon Capture

If used correctly, carbon credits and carbon capture can provide environmental, economic, and social benefits that go beyond reducing carbon emissions. They have the potential to instigate meaningful environmental change and begin to reverse some of the effects of climate change. 

However, we can’t let these two methods be a guilt-free way to reduce carbon emissions. Carbon credits and carbon capture must be used in conjunction with carbon reduction measures until the industry has time to invest, develop, and refine more sustainable innovations. 

These reduction measures don’t have to involve drastic changes either. Actions that may seem small can have a big impact because those small changes add up! You can reduce your carbon footprint in three main areas of your life: household, travel, and lifestyle. 

Reduce your household footprint:

Reduce your travel footprint:

  • Walk or bike when possible: The most efficient ways of traveling are walking, bicycling, or taking the train. Using a bike instead of a car can reduce carbon emissions by 75%. These forms of transportation also provide lower levels of air pollution.

Reduce your lifestyle footprint:

  • Switch to Renewable Energy Sources: The six most common types of renewable energy are solar, wind, hydro, tidal, geothermal, and biomass energy. They are a substitute for fossil fuels that can reduce the effects of global warming by limiting global carbon emissions and other pollutants.
  • Recycle: Recycling uses less energy and deposits less waste in landfills. Less manufacturing and transportation energy costs means less carbon emissions generated. Less waste in landfills means less CH4 is generated.
  • Eat less meat and dairy: Meat and dairy account for 14.5% of global greenhouse gas emissions, with beef and lamb being the most carbon-intensive. Globally, we consume much more meat than is considered sustainable, and switching to a vegan or vegetarian diet could reduce emissions. 
  • Take shorter showers: Approximately 1.2 trillion gallons of water are used each year in the United States just for showering purposes, and showering takes up about 17% of residential water usage. The amount of water consumed and the energy cost of that consumption are directly related. The less water we use the less energy we use. And the less energy we use, the less of a negative impact we have on the environment.

Final Thoughts

In short, carbon credits are not the same thing as carbon capture. Carbon credits are tradable certificates or permits that give companies, industries, or countries the right to emit 1 tonne (1,000kg) of CO2. Carbon capture is the trapping of carbon emissions after they have been emitted but before they enter our atmosphere.

Both are tools in our sustainability toolbox that can be used to reduce carbon emissions and mitigate climate change. But we should not rely on either or both to be a cure-all for our environmental problems. Direct measures of carbon emission reduction are much more effective in reducing emissions both in the short term and in the long term.

Stay impactful,

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Grace Smoot

Grace loves to research and write about all things related to climate action and sustainability. She holds a Bachelor’s of Science degree in Environmental Biology and works as an Environmental Survey Technician. Outside of work, she loves to work out, play soccer, and take her dog for long walks.

Did you know that the internet is a huge polluter of the environment? But fortunately not this site. This site is powered by renewable energy and all hosting-related CO2 emissions are offset by three times as many renewable energy certificates. Find out all about it here.

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