Icon close
Icon moonIcon Hamburger Menu

Carbon Credits Are Like Metals

On the surface, carbon credits might seem monolithic. A single class of material, like metal for example. Yet, just as metals like gold, silver, platinum, and iron are distinguishably unique commodities, so too are carbon credits.

Consider metals. Gold and platinum are precious, while iron is abundant. Each metal serves distinct purposes, bears different values, and contributes uniquely to our world. Likewise, the carbon market is multifaceted: it offers solar credits, forest conservation, reforestation, mangrove restoration, mineral weathering, and even machines designed to extract carbon directly from the atmosphere. Each of these credit classes represent different methods of sequestering carbon or mitigating carbon emissions.

However, this is where the similarities end. These credits are very different when you actually start to dig in. There are also uncertainties surrounding the effectiveness of various carbon credit categories, especially those focusing on emission avoidance. Recent investigations, notably from publications like The Guardian, have exposed serious accounting discrepancies, casting doubt on the legitimacy of certain credits.

While quality among carbon credits may differ, their diverse properties make them valuable in different contexts. Reforestation, for instance, not only captures carbon but also improves biodiversity, protects against flooding and creates jobs. Meanwhile, mangrove plantings offer similar benefits, with the added advantage of protecting coastlines from natural disasters like hurricanes.

The clients for these credits are diverse as well, mirroring the broad demand for different types of metals. Some consumers prioritize cost-effectiveness, seeking affordable credits mainly for regulatory compliance or PR purposes. Others, more brand-conscious, opt for premium credits, emphasizing quality. A select few even pursue the most expensive credits, hoping to stand out as pioneers in the field.

Such differences naturally lead to different costs. Reforestation can incur considerable costs because you actually need to plant new trees. Introducing heavy machinery further escalates expenses, influencing price levels accordingly.

This is important for carbon market participants to recognize because sellers of credits on the lower end of the quality scale often try to justify inflated prices by pointing to the price of higher quality credits, hoping that everyone is operating under the assumption that all carbon credits are the same, but this is not the case at all. People are essentially trying to sell iron at the price of gold because they’re both metals. Unfortunately, this market is rife with misleading representations, with certain terms misused or employed interchangeably, leading to confusion.

Lack of nuance around these issues in media coverage of carbon markets also adds to this confusion. An investigation will suggest that there is some type of problem with a specific type of carbon credit, but the headlines will imply that the criticisms can be applied to all carbon credits or the industry as a whole.

Not everything that shines is gold, and not every carbon credit is of equal worth. This is why separating credits into different liquidity pools with different prices, registries and profiles was an essential part of Solid World’s design. The credits in Solid World’s pools are all from similar high quality projects. We understood that treating carbon credits as a monolithic entity was not a recipe for an efficient market, but at the same time, we also understand that quality varies within these categories, and only the highest quality credits belong in these pools.

We have already made significant progress in this mission with the launch of our first liquidity pool for Blue Carbon Mangrove Restoration credits, some of the highest quality on the market. In the following months and years we will continue to add new liquidity pools that will bring other carbon commodities onto a transparent and public market, which will eventually look as diverse as a metal commodities market.