How Do Carbon Offsets Work?
Carbon Offsets Help Finance Clean Energy Projects
A project developer (often in rural China) wants to build a clean technology project such as a wind or hydro project. He approaches a bank with his business proposal and is refused a loan on the grounds that his project will not be profitable enough to the bank. The project owner has heard of something called ‘carbon credits’, which help to make up the difference in investment for the project. He approaches, or is approached by, a carbon project developer who promises to help him through the complex regulatory process of registering carbon credits and verifying his project as well as guarantees to purchase the carbon credits that will be created by his project. The project developer goes back to the bank, shows them the agreement, and now receives a loan because the carbon credits make the project profitable. His project can now go ahead.
