Examples of carbon reduction credits include reducing fossil-fuel use by improving fuel efficiency, or programs that reduce the methane that is generated from farms or municipal waste processing. While carbon reduction must drive the majority of our push to net zero, the transmission mechanism of carbon reduction to a purchase of an external credit is challenging. Without accurate baselines, the climate impact cannot be determined. Avoidance, reduction, and removal are also three very different actions, and some actions present more challenges in establishing an accurate baseline. Baselines must be accurately set, data-driven, and the resulting emissions impacts must be correctly calculated against those baselines. For all three types, credits are measured and issued by assessing or estimating the climate impact from carbon credit purchases-specifically, how much carbon is avoided, reduced, or removed based on the purchase of the credit.Ĭredits are assessed in different ways depending on the type, but one of the most important indicators of quality is a project’s baseline-the level of greenhouse gasses in a business-as-usual scenario which allows project developers to compare net emissions impact of the project. Carbon removal is the process of removing carbon dioxide from the atmosphere and locking it away for decades, centuries, or millennia. Carbon reduction is an action that decreases the amount of greenhouse gas emissions, compared to prior practices. Carbon avoidance is an action that prevents a carbon-emitting activity from happening. Based on their net emissions impact, there are three types of carbon credits: carbon reduction, carbon removal, and carbon avoidance. Learn more: Carbon removal credits for climate impact > Types of carbon credits: Reduction, Removal, and AvoidanceĪ carbon credit is a mechanism for one party to compensate another for the action of reducing, avoiding or removing carbon. The challenge for credit buyers is knowing how to separate the real, impactful credits from those that won’t deliver the promised emission reduction, removal, or avoidance. Our climate outlook demands massive amounts of carbon reduction coupled with large-scale carbon removal to meet global decarbonization targets. The voluntary carbon market is also necessary. Despite the evolving nature of the voluntary carbon market, purchasing high-quality carbon credits can be one of the most effective means of delivering climate benefits if it rewards good carbon projects. Some are abandoning carbon credits altogether. With worsening trust in carbon credits and the voluntary carbon market, companies are re-evaluating their strategies and commitments. News reports highlighting the presence of low-quality credits have brought renewed scrutiny-and in some cases, increased regulatory oversight-over the use of carbon credits to offset emissions. This post was revised for clarity on November 8, 2023Īs urgency for climate action has hit an all-time high, trust in carbon credits has reached an all-time low.
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