Opinion: Carbon credits and renewable energy
This article was originally published in Energy News Bulletin on 28 January 2026.
Parallel engines powering the net zero transition
By Julian Turecek
There is little doubt that we need all of the tools at our disposal to reach any net zero target and the objective of stabilising the world’s climate for future generations. Many of the people dedicating themselves to this effort have transitioned between traditional energy industries and renewable energy or into new fields such as carbon removal and nature-based carbon project development. This movement across sectors offers a clearer view of how similar many of our decarbonisation mechanisms are, and how much they depend on coordinated scale and investment. It provides a unique perspective on the various mechanisms at our disposal to solve the climate crisis and how we must work together to make them all scale to the significance required.
A persistent contradiction remains within public debates about climate policy. The purchase of renewable energy to address Scope 2 emissions is widely accepted as a legitimate mechanism for reducing emissions for individuals, companies or governments. However, carbon offsetting continues to attract questions about integrity. These concerns often focus questions on the identity or perceived motivations of the buyer rather than on the integrity of the carbon credit itself.
Scope 1 and Scope 3 emissions, including hard-to-abate emissions, cannot be addressed by the purchase of renewable energy. Organisations seeking to decarbonise must use all available means to reduce what they can, and once all feasible internal abatement options have been exhausted, the remaining emissions can only be addressed through credible externally generated offsets or removals.
The process of creating a nature-based carbon project and creating a renewable energy project have many similarities. Both involve upfront investment, significant land management considerations, extensive community liaison and consultation; they typically require offtake contracts to underpin revenue which then facilitate financing; are governed by complex regulatory mechanisms and obligations; and are long term undertakings. In practice, these project types share far more in common than the public conversation often suggests.
Perhaps in earlier times carbon credits were denoted as “get out of jail free” cards, especially when oversupply in the 20 years old Clean Development Mechanism (CDM) market had such instruments in the single digit ranges. Now, however, with carbon pricing at least in Australia at $35-40/t and with industry forecasters seeing a trajectory towards $100/t within 10 years, these dispersions can no longer hold. Any entity purchasing these types of credits, or even higher cost carbon removals, are now making considerable outlays to purchase credits.
The modern carbon market no longer consists of cheap or symbolic instruments. Companies are making substantial investments when they purchase offsets or removals. When these purchases take the form of long term offtake contracts, as is common in the renewable energy market, they become more than one-off transactions. They represent upfront financing for the projects that produce the credits. Climate progress depends on physical changes to the planet, and without significant investment in carbon projects, the supply of high-quality credits does not materialise.
For a company to choose to invest in carbon offsets, they will certainly have considered all options in their internal carbon abatement curve, stacking all the options (internal and external) by cost and systematically working their way through these options. The often unseen benefit of the commitment to offset emissions is that all economic options that are lower cost than these offsets must have already taken place; in other words, effort is being made across the company to achieve reductions. Yes, there will be ongoing emissions. But the purchase of carbon offsets ensures that these emissions do not continue unabated, and it represents a practical and credible commitment to climate action, particularly for sectors where full elimination of emissions is not technically possible.
This, in fact, is the essence of what net zero actually means. Carbon credits are the “net” in “net zero”. The Paris Agreement does not bound us to “absolute zero”; while some entities and companies may, commendably, aim to achieve that goal, it is beyond the reach of many in a practical and economic sense. Net zero, by definition, accepts that there will be ongoing emissions, but that these will be offset or removed by investment into the kinds of activities that create carbon credits including reforestation and engineered carbon removal such as direct air capture. Making this step deserves commendation and not denigration. Action to offset one’s emissions should not be criticised for its failure to cease all emissions; this entails that absolute zero is the only goal, rather than net zero. Setting absolute zero as the standard for all organisations creates unrealistic expectations and discourages investment in effective and necessary climate solutions. It is yet another example of the perfect being the enemy of the good.
We should therefore celebrate the purchase of carbon credits and high-quality removals of offsets to address residual Scope 1 or Scope 3 in the same way we celebrate the purchase of renewable energy to address Scope 2. We absolutely should make sure that the credits being purchased have utmost integrity, but integrity cannot be then later diminished by an arbitrary or judgemental assessment of the identity or actions of the buyer. Buyers of carbon credits should be commended for their action towards reaching their net zero targets. If decarbonisation is to occur at the necessary pace, carbon projects must be financed, and recognising the role of these credits alongside renewable energy procurement is essential for building a credible pathway to net zero.
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