Carbon credits
Carbon allowances: A permit to emit GHGs, used in Cap-and-Trade systems and issued by governments, such as EUA or UKA. They are traded within compliance markets.
Carbon credits: A carbon credit is created through financing activities that reduce, avoid, or absorb greenhouse gas (GHG) emissions. A carbon credit is a certificate representing the reduction or removal of one metric ton (or 2,205 pounds) of CO2 equivalent emissions.
Carbon reduction or removal projects are validated and verified by an independent third party before being issued as carbon credits by a carbon registry. The credits are then traded for voluntary or compliance purposes.
There are many types of projects, from projects that utilize technology to remove or prevent carbon emissions, such as mine methane capture and destruction and landfill gas capture, to home-based projects such as efficient cookstoves, to nature-based projects, such as afforestation and reforestation, to name a few.
Carbon credit programmes issue project methodologies and issue carbon credits for each tonne of emission reduction or removal that is verified and certified.
Additionality is the question of whether a proposed activity goes beyond a specified baseline or business as usual. For example, GHG reductions are additional if they would not have occurred in the absence of a market for carbon credits. If the reductions would have happened anyway –then the reductions are not additional.
