How are carbon credits issued?

February 5, 2023

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3 min

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Carbon neutrality

Issuance of carbon credits

Process for issuance of carbon credits

A voluntary carbon credit is a unit of measurement representing one metric ton of carbon dioxide equivalent (CO2e) that has been reduced, avoided, or removed from the atmosphere by a project or activity. The voluntary carbon market is a platform where individuals, organizations, and governments can purchase carbon credits to offset their carbon footprint. This market is not regulated by any governing body and is voluntary in nature, meaning that companies and organizations participate of their own volition.

The voluntary carbon market is largely driven by corporate social responsibility (CSR) initiatives and individuals looking to offset their carbon footprint.

So, how can Greentechs issue carbon credits on the voluntary market? The process consists of the following steps.

issuance carbon credits

Project identification with carbon credits potential

The first step of carbon credits issuance is the identification of projects that reduce greenhouse gas emissions. These can be recycling or reconditioning projects, bioenergies projects, a low-carbon material project, carbon capture projects or forestry projects.

Measurement of carbon impact

A comparative lifecycle assessment has to be conducted on the project’s activity to determine the amount of carbon credits it can emit. A comparative LCA is a method that models environmental impacts of all material and energy flows across the life cycle of a product or service. It uses a “cradle to grave” perspective, considering life cycle stages such as extraction of raw materials, processing, use, and end of life waste treatment.Carbon credits are calculated by comparing the GHG emissions of the project scenario to the emissions of a baseline scenario, or reference scenario, that would have occurred without the implementation of the project. The difference in GHG emissions between the two scenarios translates to the amount of GHG emissions the project can be credited with avoiding/removing, and the number of credits they may be issued.The comparative LCAs process consists of the following steps:

  • Determines a baseline model, corresponding to the project industry’s average emissions. LCAs must use the most recent data available. Data coming directly from the project (i.e. foreground data) should be no more than 1 year old. Background data (i.e. market averages, global statistics) should be no more than 3 years old.
  • Compound the project’s emissions in every step of its lifecycle from data it provides. All measurements from the project scenario must be verifiable and based on recent conditions. These measurements include quantities (volume, mass, number) and type of products and inputs. All background data must be derived from traceable, unbiased, reputable sources. For geographic accuracy, national-level background data should be prioritized. Local (region, state, city-scale) or global sources may be used if justified in the DPD.
  • Substract the project’s emission from the baseline model’s emissions, obtaining the amount of CO2 saved or removed by the project. This number will then be converted in carbon credits.

Calculations of GHG emissions for the baseline and project scenarios must generally follow a robust, recognized methodology for LCA or similar life-cycle based method, such as:

  • Carbon footprint (as defined in ISO 14067)
  • Life Cycle Assessment, cradle-to-grave (ISO 14040/14044)
  • GHG Protocol’s Product Life Cycle Accounting Standard
  • FDES (according to the NF EN 15804+A1 standard)
  • European Union PEF (Product Environmental Footprint)

These LCAs can be conducted by sustainability consulting firms or carbon credit standards.

Carbon credit standards

In order to proceed to its carbon credits issuance, the project then collaborates with a carbon credit standard. These organisms have a set of guidelines and criteria used to evaluate and certify projects that aim to reduce or remove greenhouse gas emissions. They provide a credible and transparent system for companies, organizations, and individuals to offset their carbon footprint by purchasing verified carbon credits, necessary for issuance.

Standards define the rules and requirements for project developers to register and verify their emission reduction projects to proceed with issuance. This may include criteria such as the type of project, the methodology for measuring and reporting emissions, and the social and environmental safeguards to ensure the integrity and sustainability of the project. Standard will verify the project’s compatibility with its emissions criteria, which include looking over the LCA and verifying its structure and data. Once a project is registered and verified, it is issued with carbon credits that represent a tonne of carbon dioxide equivalent (CO2e) that has been reduced or removed from the atmosphere.

The criteria set by Riverse ensure our standard respects the best practice of the market, and are resumed through the following the carbon credit core principles:

  • Measurability
  • Additionality
  • Reality
  • Permanence
  • Unicity
  • Co-benefits
  • Substitution
  • Do no harm
  • Leakage
  • Rebound effects
  • Technology Readiness Level
  • Targets Alignement
  • Minimum impact
  • Independent Verification.

Carbon Credits Monitoring and Verification

In the process of carbon issuance, the project must be monitored and verified by independent third party auditors to ensure that the reduction in emissions is real and measurable. These independent third party auditors are generally contacts provided by the Carbon Credit standard.

The verification process involves a detailed review of the project’s emissions reduction methodology, monitoring plan, and data collection and reporting procedures. This information is compounded, in Riverse’s case, in a detailed project description (DPD) format.

VVBs must be accredited by the standard in order to validate DPDs to issue credits.In Riverse’s case, to be accredited, VVBs must:

  • Have the ISO 14065 accreditation or equivalent (i.e. COFRAC ISO:17029 - CSR)
  • Have more than 5 years of auditing experience, including at least 2 years in environmental auditing
  • Sign Riverse’s Conflicts of Interest Policy
sustainable-energy-in-a-field for carbon credits issuance

Carbon credit issuance

Finally, if the verification process is successful, carbon credits are issued to the project.

After their issuance, these carbon credits belong to the project and can be sold directly to organizations looking to offset their carbon footprint or through carbon credit marketplaces and brokers. The price of these credits varies depending on a number of factors such as:

  • The quality and credibility of the carbon credit: Buyers may be willing to pay more for carbon credits that have been verified by a reputable third-party certification scheme, or that have been issued under a recognized standard
  • The type of project that generated the carbon credit: Buyers may be willing to pay more for carbon credits that are generated from projects that have additional environmental or social co-benefits
  • The duration of the carbon credit: Carbon credits can be sold for a fixed duration, typically ranging from one to ten years. Longer-term credits may command a higher price, as they provide a more reliable and predictable source of carbon offsets.
  • The market demand for carbon credits: As more companies and individuals look to offset their carbon emissions, the demand for carbon credits may increase, driving up prices.
  • The availability of carbon credits: If there is a limited supply of carbon credits available, prices may rise as buyers compete for a limited pool of credits.

Conclusion

Carbon credits on the voluntary market are issued through a rigorous process of project identification, baseline emissions measurement, project implementation, monitoring and verification, and carbon credit issuance. This process ensures that carbon credits represent real and measurable emission reductions and provide a way for individuals and organizations to offset their carbon footprint and contribute to the fight against climate change.

By providing a flexible and accessible way for companies to reduce their carbon emissions, the voluntary carbon market can play a key role in helping to transition to a low-carbon economy through the issuance of carbon credits.

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