Beyond Carbon: Why Climate Credits Are a Better Bet Than Carbon Offsets
For nearly two decades, carbon credits have been the go-to tool for companies and governments seeking to paper over their environmental sins. By purchasing credits that ostensibly fund emissions reductions elsewhere—planting trees, preserving rainforests, or financing renewable energy in the developing world—polluters have been able to claim carbon neutrality without curbing emissions at source. The global carbon offset market surpassed $2 billion in 2023, yet its credibility is eroding fast.
Recent scandals have laid bare the frailty of this system. Investigations into large offset schemes have revealed that many projects fail to deliver promised carbon reductions, suffer from double-counting, or rely on “avoided deforestation” claims that are nearly impossible to verify. One high-profile case found that more than 90% of offsets issued by a major certifier were “phantom credits”—linked to no real-world emissions cuts. The result: corporations flush with green PR, while the atmosphere grows ever warmer.
Enter climate credits—a newer, arguably more grounded approach to tackling the climate crisis. Instead of funding elusive reductions in carbon emissions, climate credits finance concrete adaptation and resilience projects, such as coastal flood defenses, drought-resistant agriculture, or urban cooling infrastructure. These interventions may not subtract CO₂ from the sky, but they deliver tangible returns: reduced disaster risk, higher productivity, and better public health outcomes.
Unlike carbon offsets, the impact of climate credits is measurable and local. A seawall either holds back rising tides or it doesn’t. A community irrigation project either improves crop yields or it doesn’t. For investors, this tangibility translates into lower reputational risk and, increasingly, financial returns. According to a 2024 report by the Climate Policy Initiative, every $1 invested in resilience yields between $4 and $10 in avoided losses and productivity gains. The World Bank now includes climate resilience metrics in sovereign credit ratings—a sign that the financial mainstream is waking up.
The shift is also ideological. Carbon offsets, critics argue, perpetuate a “license to pollute” model that delays the necessary decarbonisation of heavy-emitting sectors. Climate credits, by contrast, shift focus from guilt-driven carbon accounting to opportunity-driven adaptation. For communities on the frontlines of climate impact, suffering significant infrastructure damage and resulting financial stress, this shift is especially appealing. Climate credits could unlock new revenue streams for infrastructure that is otherwise underfunded.
Ultimately, climate credits may not satisfy those obsessed with carbon arithmetic. But they offer something carbon offsets increasingly cannot: demonstrable value. As climate impacts intensify and faith in carbon markets wanes, investors and governments would do well to follow the money—not just the carbon.
