A carbon credit represents the removal or avoidance of 1 tonne of carbon dioxide being released into the atmosphere. A value is assigned to each tonne removed or avoided. Businesses are able to purchase carbon credits to offset their own emissions. The ultimate goal is to achieve a net zero state, where all emissions are offset by carbon capture initiatives.
A carbon offset, on the other hand, is a carbon credit that has been retired and can no longer be resold. Carbon offsets are used to offset a company's emissions so that they can offset their impact on the environment. The value of a carbon offset is extinguished when it is retired.
Carbon offsetting can be a useful tool for reducing greenhouse gas emissions and mitigating the impacts of climate change. However, it is important to carefully consider the source and quality of offsets, as well as any potential unintended consequences, to ensure that offset projects are effective and contribute to genuine emissions reductions.
How the Australian Carbon Token fits in
An Australian Carbon Token (BCAU) is a digital token that notionally represents 1kg of carbon captured, specifically an Australian Carbon Credit Unit (ACCU). BCAUs are created to allow retail investors to invest in the Australian carbon market from $1. BCAUs can only be minted in an amount equal to the number of ACCUs that BetaCarbon holds. Once these tokens are sold, BetaCarbon must acquire additional ACCUs in order to release more tokens. This process ensures that BCAUs are notionally backed by real carbon credits. Investors holding BCAUs can potentially influence the price of carbon credits by reducing supply and making it more expensive for businesses to pollute.