The carbon credit is a unit of measurement that represents the reduction of one ton of greenhouse gas (GHG) emissions, such as carbon dioxide (CO2), or the removal of one ton of GHG from the atmosphere. It is a way to quantify and trade GHG reduction or removal in a carbon market.
Carbon credit is generated from projects that aim to reduce or remove GHG emissions, such as renewable energy projects, energy efficiency, reforestation and industrial process improvements. These projects are evaluated by independent and accredited organizations that issue certificates for reducing GHG emissions. For every ton not emitted, a carbon credit is generated.
The Kyoto Protocol is an international treaty that established commitments to reduce greenhouse gas emissions that contribute to global warming. The protocol introduced different mechanisms for GHG reduction, as well as an emissions trading system and the Clean Development Mechanism (CDM). It was adopted in 1997 during the United Nations Conference on Climate Change held in Kyoto, Japan.
The CDM (Clean Development Mechanism) allows projects to reduce GHG emissions in developing countries to be certified and generate carbon credits, which can be sold to industrialized countries that have emissions reduction targets to meet. Thus, the CDM allows developing countries to participate in the global carbon market and receive financing for projects to reduce GHG emissions. CDM projects can cover several areas, such as the adoption of cleaner technologies in industry, improving energy efficiency in buildings and implementing renewable energy systems. For a CDM project to be approved, it must meet strict criteria regarding emissions reduction, sustainable development and additionality (i.e., the emissions reduction must be additional to what would occur without the project).
The main objective of the Kyoto Protocol was to stabilize the concentration of greenhouse gases in the atmosphere at a level that would prevent dangerous interference with the climate system. To this end, the industrialized countries that adhered to the agreement committed to reducing their greenhouse gas emissions by at least 5.2% in relation to 1990 levels, in the period between 2008 and 2012. Although many (such as Brazil) have adhered to the Kyoto Protocol, some important countries, such as the United States, have not ratified the agreement. Furthermore, the Kyoto Protocol expired in 2020 and was replaced by the Paris Agreement in 2015, which sets new emissions reduction targets for signatory countries.
Carbon credits are a mechanism used to encourage the reduction of greenhouse gas (GHG) emissions and promote the transition to a low-carbon economy. Voluntary market carbon credits can be generated by renewable energy projects and forest preservation projects, among others. The main difference between renewable energy and forestry carbon credits is the type of project that generates the credits and the type of emissions reduction that is promoted.
Renewable energy carbon credits are generated by projects that produce energy from renewable sources, such as wind, solar, hydroelectric, biomass, among others. These projects help reduce GHG emissions, as they replace energy generation with fossil sources, which are more polluting. Renewable energy carbon credits are calculated based on the amount of energy produced and the amount of emissions avoided.
Forest carbon credits are generated by projects that promote the preservation or reforestation of natural areas, such as forests. These projects help to reduce GHG emissions, as forests are important carbon sinks, that is, they absorb large amounts of carbon from the atmosphere. Forest carbon credits are calculated based on the amount of carbon that is stored or would no longer be emitted due to the preservation or reforestation of the area. Although forestry credits can have a positive impact on biodiversity conservation and carbon sequestration, they do not directly encourage the production of clean, renewable energy.