Navigating the World of Carbon Credits: Compliance and Beyond
Climate change has necessitated global action to reduce greenhouse gas emissions. A pivotal tool in this fight is the concept of carbon credits, which come in various forms and are integral to both regulatory and voluntary markets. In this blog, we’ll explore the nuances of carbon credits, focusing on Compliance Carbon Credits, Certified Emission Reductions (CERs), Emission Reduction Units (ERUs), and Verified Emission Reductions (VERs).
Carbon credit represents a unit of measurement that quantifies the reduction, avoidance, or removal of one metric ton of carbon dioxide (CO2) or its equivalent in other greenhouse gases. The concept is based on the principle that each emission reduction has a positive environmental impact and contributes to achieving carbon neutrality.
When a credit is used to reduce, sequester, or avoid emissions, it becomes an offset and is no longer tradable.
Different Types of Carbon Credits
- Compliance Carbon Credits
- Certified Emission Reductions
- Emission Reduction Units
- Verified Emission Reductions
Compliance Carbon Credits
Compliance carbon credits, also referred to as regulatory or mandatory carbon credits, are crucial components of governmental and international strategies to curb emissions. These credits, akin to carbon allowances or permits, are allocated to entities that achieve predefined emission reduction targets or are auctioned off. Unlike their voluntary counterparts, these permits can be issued in large quantities by governmental regulators, each representing the right to emit one tonne of CO2.
Certified Emission Reductions
CERs are a type of compliance carbon credit generated through the Clean Development Mechanism (CDM) under the United Nations Framework Convention on Climate Change (UNFCCC). These projects, primarily conducted in developing nations, aim to foster sustainable development while reducing emissions. With the Paris Accord in play, the CDM is undergoing significant revamping.
Emission Reduction Units (ERUs)
ERUs are birthed from Joint Implementation initiatives that involve emission reduction activities in developed nations. These allow countries with emission reduction commitments to invest in similar projects in other developed countries, facilitating a collaborative approach to emission reduction.
Verified Emission Reductions (VERs)
VERs, also known as Voluntary Carbon Credits, are the fruit of projects that have undergone stringent third-party verification processes. They are not tethered to mandatory regulatory frameworks or international agreements but cover a spectrum of activities, including renewable energy, reforestation, energy efficiency, and more. Various carbon registries like Verra, Gold Standard, Universal Carbon Registry, and Global Carbon Council grant these credits.
Gold Standard Credits
Gold Standard credits are a type of voluntary carbon credit that meet rigorous environmental and social criteria. They are issued to projects that demonstrate exceptional sustainable development outcomes, such as poverty reduction, biodiversity protection, and community engagement, in addition to emission reductions. Gold Standard credits provide an even higher level of confidence and credibility to buyers.
The landscape of carbon credits is diverse and complex, bridging the gap between compliance and voluntary actions. As the world continues to combat climate change, understanding the intricacies of carbon credits is paramount for governments, businesses, and individuals alike. These credits not only represent a commitment to a greener future but also embody the collaborative spirit needed to address the global challenge of climate change.