I refer to the letter, “Carbon credits may be giving companies a way out instead of reducing actual emissions” (Nov 15).

The writer asserts that buying carbon credits does not reduce companies’ actual emissions. But if it costs an entity to do something, it would certainly do less of it than if the activity was free.

He misses the spirit of a carbon credit policy. The whole point of such a system instead of a hard, inflexible ban or quota, is so that individual companies have the latitude to make decisions that account for conditions concealed from policymakers. A carbon credits policy, if done accurately, already sets the socially efficient level of carbon emissions. Flexibility is an intention and a feature of market-based solutions like this.

Moreover, companies are not outsourcing their environmental and social responsibilities to someone else by buying carbon credits, as the writer contends. Companies are doing precisely the opposite. Firms are paying to produce carbon, so they are being held liable for the environmental and social costs they cause.

What companies are outsourcing is the work involved in the environmental projects. They do that because that is how specialisation and markets work.

The writer’s concern about carbon credits funding dismal and inadequate environmental projects is valid and relevant, though it would be more appropriate to aim it at lawmakers rather than companies.

Tan Yi Swee