🌳Carbon Credits

The Emergence of Carbon Credits

CO2 is the primary greenhouse gas (GHG) emitted through human activity making up 79% of all GHG emissions, therefore being the biggest contributor to climate change. The emergence of carbon credits resulted from the consensus that in order to offset Earth’s CO2 emissions we can’t halt all CO2 emitting practices as this will be detrimental to our societies and economies. Instead, we must offset Earth's CO2 emissions with an equal amount of CO2 removed or reduced from the atmosphere, hence the assets of interest: carbon credits.

One carbon credit or offset represents the measurable and verifiable removal or avoidance of one tonne of carbon dioxide equivalent (t CO2-e) from the atmosphere.

The term "carbon dioxide equivalent" refers to the summation of multiple greenhouse gasses based on each gasses' global warming potential (GWP). The Global Warming Potential (GWP) was developed to allow for comparisons of the global warming impacts of different types of gases. Specifically, it is a measure of how much energy the emissions of 1 tonne of a gas will absorb over a given period of time, relative to the emissions of 1 tonne of carbon dioxide (CO2).

The Purpose of Carbon Credits

Carbon credits connect carbon projects with consumers that purchase and retire credits to achieve their climate targets while supporting project developers and their workforce in return. Credits are a valuable tool that can allow us to account for hard-to-abate emissions, emissions that may be difficult to eliminate completely with current technology. The purchase of credits is key to facilitating measurable and accountable emissions reductions, to achieve β€œNet Zero” or "Carbon Neutrality".

Note: Credits should not be treated as an alternative to reducing emissions, but rather as a means to offset unavoidable emissions. They should only be used temporarily, to avoid delaying society's transition to a low- or zero-carbon economy (UNEP, 2020). The Science-Based Targets Initiative (SBTi) released its guidance for using offsets as part of a robust corporate emission-reduction program, contributing to a growing debate over what β€œcarbon neutrality” is and is not. There have been efforts to strengthen carbon offsetting methodologies in recent years under the International Carbon Reductions & Offsetting Alliance (ICROA).

Carbon Credit Attributes

Differentiation in Carbon Credits:

  • Type of credit: removal vs. avoidance/reduction

  • Accounting taxonomy: ex ante or ex post

  • Project type: includes the different methods to reduce greenhouse gases such as renewable energy (solar, wind, hydro, geothermal), soil carbon, reforestation, protecting forests from deforestation, methane capture, or carbon capture projects.

  • Country: Credits from certain countries might be perceived to be of higher quality, as well as credit costs differ depending on the country of origin.

  • Certifying standard: Some certifying bodies adhere to a more rigorous criteria that includes collecting additional data points and critically analyzing metrics such as additionality and permanence.

  • Co-benefits: Include community economic development, biodiversity protection, reduced air pollution, national energy security, reduced fuel costs, employment possibilities, soil and water quality.

ICROA Quality Assurance in Carbon Offsetting

ICROA: The International Carbon Reduction and Offsetting Alliance

  • Real: All emission reductions and removals – and the project activities that generate them – shall be proven to have genuinely taken place.

  • Measurable: All emission reductions and removals shall be quantifiable, using recognized measurement tools (including adjustments for uncertainty and leakage), against a credible emissions baseline.

  • Permanent: Carbon credits shall represent permanent emission reductions and removals. Where projects carry a risk of reversibility, at minimum, adequate safeguards shall be in place to ensure that the risk is minimized and that, should any reversal occur, a mechanism is in place that guarantees the reduction or removals shall be replaced or compensated. The internationally accepted norm for permanence is 100 years.

  • Additional: Additionally is a fundamental criterion for any offset project. Project-based emissions reductions and removals shall be additional to what would have occurred if the project had not been carried out.

  • Independently verified: All emission reductions and removals shall be verified to a reasonable level of assurance by an independent and qualified third party.

  • Unique: No more than one carbon credit can be associated with a single emission reduction or removal as one metric ton of carbon dioxide equivalent (CO2e). Carbon credits shall be stored and retired in an independent registry.


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