Lesson 1, Topic 1
In Progress

How are carbon credits generated

Carbon credits are generated through specific project activities that avoid, reduce, or remove GHG emissions. These projects need to go through a certification process to be able to issue certified carbon credits.

For that, they need to meet the all the eligibility criteria set by the scheme or the certification standard, which ensures the credibility, transparency and environmental integrity of the carbon credits issued. This process usually involves the following steps:

The Certification Process in Detail

  • Project identification and planning: The process starts with the estimation of the climate impacts of the project, selection of an applicable methodology to estimate a baseline scenario, draft the project design and assess of the additionality.
  • Preliminary approval and validation by third party: A first review will be evaluated by a certification body, followed by an independent assessment that can be performed by a first, second or a third party.
  • Project implementation: The project will be implemented according to the validated design and selected methodology.
  • Monitoring and performance verification: The project developer will collect data to quantify and monitor the emissions reductions generated. After that they will be verified usually by a third party.
  • Carbon credits issuance: Once all the previous steps are successfully conducted, the emissions reductions generated will be converted into carbon credits, which will be issued and included into marketplace, where buyers will purchase then to offset their emissions. Once purchased, the carbon credits will be retired of the marketplace forever.

What are the Most Common Project Types that Generate Carbon Credits?

What Makes a Reliable Carbon Credit?

RealCarbon credits represent real emissions reductions that should be proven to have genuinely taken place.
Independently verifiedThe emissions reductions need to be independently verified to a reasonable level of assurance by a regulatory government or a qualified certification standard.
UniqueEach carbon credit must be unique, meaning that a single emission reduction or removal can only be associated to an individual carbon credit.
AdditionalityThe reductions achieved by a project that generates carbon credits need to be considered ‘additional’ to what would have happened if the project had not been developed.
PermanenceProjects need to guarantee that the carbon captured will be removed or ‘stored’ from the atmosphere forever.
LeakageOffsets projects should not accidentally encourage the “leakage” of emissions elsewhere or social harm.
MeasurableEmission reductions can be calculated with scientific rigour and be monitored and audited. To do this, there must be calculation and monitoring methodologies that are appropriate to the context and technology concerned.
Double-countingEach carbon credit must correspond to a single tonne of CO2e and therefore, once this carbon credit has been sold, it will be retired from the marketplace forever.
Impact assessmentMost carbon credit projects are based in developing economies, raising specific challenges in quantifying the impact on indigenous communities, unintended knock-on effects and ultimately “real offset”.