Creating carbon credits

Creating carbon credits

This article is missing information about carbon credit production-related software and online tools. Please expand the article to include this information. Further details may exist on the talk page. (January 2021)

The principle of supplementarity within the Kyoto Protocol means that internal abatement of emissions should take precedence before a country buys in carbon credits. However it also established the Clean Development Mechanism as a Flexible Mechanism by which capped entities could develop measurable and permanent emissions reductions voluntarily in sectors outside the cap. Many criticisms of carbon credits stem from the fact that establishing that an emission of CO₂-equivalent greenhouse gas has truly been reduced involves a complex process. This process has evolved as the concept of a carbon project has been refined over the past 10 years.

The first step in determining whether or not a carbon project has legitimately led to the reduction of measurable and permanent emissions is understanding the CDM methodology process. This is the process by which project sponsors submit, through a Designated Operational Entity (DOE), their concepts for emissions reduction creation. The CDM Executive Board, with the CDM Methodology Panel and their expert advisors, review each project and decide how and if they do indeed result in reductions that are additional^[22]

In recent years, software tools have been developed to aid in carbon credit creation, such as in relation to forest conservation,^[23] and solid waste or wastewater management.^[24][25]

Forests can be used to create credits, often involving the use of geospatial analytical systems to calculate the carbon offset of preserving an area forest or a reforestation initiative.^[26] REDD+ is one example of a forest carbon credit initiative.^[27][28] REDD+ carbon credits^[29] for individuals^[30] and businesses^[31] may be purchased through carbon offset retailers^[32] like Carbonfund.org Foundation or ACT4.io.

Additionality and its importance

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It is also important for any carbon credit (offset) to prove a concept called additionality. The concept of additionality addresses the question of whether the project would have happened in the absence of an intervention in the form of the price signal of carbon credits. Only projects with emissions below their baseline level, defined as emissions under a scenario without this price signal (holding all other factors constant), represent a net environmental benefit. Carbon projects that yield strong financial returns even in the absence of revenue from carbon credits; or that are compelled by regulations; or that represent common practice in an industry; are usually not considered additional. A full determination of additionality requires a careful investigation of proposed carbon offset projects.^[33]

It is generally agreed that voluntary carbon offset projects must demonstrate additionality to ensure the legitimacy of the environmental stewardship claims resulting from the retirement of carbon credits (offsets).

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