Last updated: 08/2024
What is a carbon credit?
A carbon credit represents either the permanent removal of a tonne of CO2e from the atmosphere or the avoidance of one tonne of CO2e being emitted in the first place, through changes in land use or energy generation.
One of the most effective ways of removing carbon from the atmosphere is planting trees, which – as they grow – turn CO2 into solid carbon stored in their trunks and roots.
Carbon credits can also be generated by taking an action that prevents the emission of CO2 in the first place. This is called ‘avoidance’. In the UK, an example of natural emissions avoidance is the restoration of peatlands, which release large volumes of greenhouse gases when they are in a degraded state.
Legitimising carbon credits and carbon offsetting through additionality and permanence
There are two key ways that carbon credits and offsets are legitimised: additionality and permanence.
To generate carbon credits from emissions removals or avoidance, a project must be able to demonstrate that it is ‘additional’ to what would have otherwise occurred.
So, if a woodland creation or peatland restoration project would have gone ahead without income from the sale of carbon credits, no credits can be generated.
While it is still possible to quantify the carbon that will be captured, the key difference is that if carbon credits are to be generated and sold, the investment by the buyer of those credits must have been instrumental in allowing the project to proceed. Otherwise, that investment did not, in reality, enable the project to happen or reduce the amount of carbon in the atmosphere beyond what would have happened anyway.
Removal or avoidance of greenhouse gas emissions must also be permanent. In the UK, the permanence of woodland creation is safeguarded by legislation such as the Environmental Impact Assessment Regulations (1999) and The Forestry Act (1967). Projects certified under the Peatland Code and Woodland Carbon Code are also protected by a risk buffer of carbon credits held by the Code’s administrators.
The principles of additionality and permanence underpin all reputable carbon standards, including those operated globally by companies such as Verra and Gold Standard. These standards exist to verify carbon removals and reductions around the globe with robust methodologies and third-party auditing. They are essential for creating and maintaining confidence in the voluntary carbon market.
Next up, learn about the global mechanisms used for emission reductions and how they have evolved from the 2015 Paris Agreement to today. All this and more in ‘Making sense of carbon markets.’
