Carbon credit: A guide to company setup and business opportunities

Environmental sustainability, social responsibility, and good governance (ESG) are increasingly prioritized globally. 

Governments worldwide are pushing for "NetZero," and businesses are exploring the potential of carbon credit trading, a system that rewards businesses for reducing emissions. 

If you're considering entering this market, here’s everything you need to know about carbon credits and how to set up a foreign company to participate in carbon credit trading.

1. What are carbon credits and carbon offset?

Carbon credits, also known as carbon certificates, represent the reduction or removal of one ton of carbon dioxide (CO2) from the atmosphere.

When a company purchases carbon credits from a government or authorized body, it essentially buys the right to emit one ton of CO2. 

If a company has extra carbon credits, it can sell them to other businesses that exceed their emission limits.

Carbon offsetting involves businesses purchasing carbon credits to compensate for their greenhouse gas emissions. A company emitting greenhouse gases can buy carbon credits from another company that has reduced its emissions, balancing its environmental impact.

A real-world example of carbon offsetting is Microsoft’s initiative to become carbon-negative. In 2020, Microsoft purchased 1.3 million metric tons of carbon removal from various projects, including forestry, soil sequestration, and carbon capture.

2. What is the carbon market?

The carbon credit market is divided into two primary categories:

2.1. Mandatory carbon market 

This market is regulated by international agreements that set common standards for carbon trading. These agreements aim to reduce carbon emissions globally. The key international agreements include:

The Kyoto Protocol was signed in 1997 and adopted by over 170 countries. This protocol has expired but was a major step toward regulating emissions.

The Paris Agreement, which replaced the Kyoto Protocol, was signed in 2016 by over 195 countries. This agreement is currently in effect and aims for global cooperation to tackle climate change.

Other regional agreements also play a role. For example, the EU Emissions Trading System (EU ETS) operates across Europe, and California has its Cap-and-Trade Program. These programs regulate carbon emissions and encourage businesses to invest in reducing their greenhouse gases.

2.2. Voluntary carbon market

This is a more flexible system where organizations, businesses, or even individuals can buy and sell carbon credits to offset their emissions. 

Unlike the mandatory market, participation in the voluntary market is not legally required. Instead, companies and individuals participate to align with their ESG goals and show a commitment to sustainability.

3. Why should your company start carbon credit trading?

With the trend of carbon offsetting all over the world, carbon credit trading offers numerous benefits:

4. Which project is ideal to start with carbon credit trading?

Businesses can generate and sell carbon credits by developing projects that reduce, capture, or store carbon emissions.

These projects not only help mitigate the company’s emissions but also offer a source of revenue by selling credits to other organizations. Some of the most common carbon-offset projects are

• Renewable energy: selling renewable energy sources such as wind or solar power;
• Energy efficiency: optimizing energy use in buildings or industrial processes such as LEDs implementation
• Carbon and Methane capture: Building power plants helps capture CO2 emissions and store them underground to restore soil characteristics.
• Land use and reforestation: Reforestation and proper land management projects use nature’s carbon sinks, such as forests, to absorb CO2 from the atmosphere.

5. Where can you register a carbon credit trading company abroad?

If you want to enter the lucrative carbon credit market, one of your first steps is to decide where to establish your company. 

Each country offers different benefits and regulations. 4 countries you can consider are:

• Singapore: Incorporating a carbon credit trading company in Singapore offers several advantages. Businesses enjoy a 0% GST if trading carbon credits outside of Singapore.
• Hong Kong: Hong Kong provides attractive tax incentives for businesses, including no value-added tax (VAT), no capital gains tax, and no dividend tax, making it an ideal location to set up carbon credit trading companies.
• United States: Forming a company in the U.S offers increased brand visibility and access to a large market. The tax benefits will vary by state, with some offering income tax exemptions and others sales tax exemptions.
• BVI: Setting up a carbon credit trading company offshore can offer significant tax advantages. In many cases, there is 0% income tax, no financial reporting requirements, and a quick and straightforward company formation process.

6. How to incorporate a carbon credit trading company abroad?

• 1

  Step 1: Choose a country

• 2

  Step 2: Register your company

• 3

  Step 3: Open a bank account

• 4

  Step 4: Set up accounting and financial systems

7. How can Global Link Asia Consulting help you open a carbon credit trading company overseas?

Global Link Asia Consulting offers comprehensive support for businesses interested in carbon credit trading. Our services include:

• Advising on the best location (Singapore, Hong Kong, or offshore countries), 
• Assisting with company registration and compliance, 
• Helping open a corporate bank account with trusted banks
• Providing ongoing support with tax reporting and compliance.

8. FAQs about carbon credit trading company

We offer comprehensive DUNS registration packages for every countries including Singapore, the USA, Hong Kong, Seychelles, BVI, Belize, Vietnam, and more. Our package includes:

• Consulting on Suitable DUNS service packages.
• DUNS registration for Apple Developer Account.
• DUNS registration for Google Ads account verification.
• DUNS registration for Apple Business Manager.
• DUNS registration for Logistics Business.
• DUNS registration for TikTokShop, E-commerce.

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