Carbon Credit Additionality
Carbon Credit
As businesses set increasingly ambitious commitments to reduce their greenhouse gas emissions, a market is growing to buy carbon credits, or offsets. These are generated by projects that claim to reduce the amount of CO2 in the air by removing it or preventing it from being emitted in the first place, often through new technologies or nature-based solutions.
Credits can be purchased by companies or individuals who want to offset their own carbon emissions, and then credited into a registry as an emissions reduction. This type of market is called a voluntary carbon.credit market, and it’s grown rapidly over the past decade, as business leaders have committed to climate change mitigation.
The carbon market, which is growing rapidly, plays a critical role in helping limit global warming. Its main function is to provide a way for businesses to help meet their climate goals without having to cut other costs.
Carbon Credit Additionality
However, a key challenge for the carbon market is ensuring that its projects have real climate impact and that they are of high quality. One of the key markers for quality is ‘additionality’, which refers to whether a project produces a significant impact on climate compared to a ‘business as usual’ baseline.
Additionality is an important concept to understand, and can be one of the main differences between high and low-quality offset projects (alongside permanence, single counting, avoiding overestimation of impact, and co-benefits). It’s something that all carbon-crediting programs should be aware of, and should take into account when they develop their program-level requirements, as well as when they issue individual carbon credits for sale.
A carbon credit is created when a project reduces the amount of carbon emissions or removes them from the atmosphere, by either replacing a carbon-intensive process with one that uses less energy, or by removing or preventing the emission of carbon dioxide altogether through a new technology or nature-based solution. The credits are then sold by intermediaries to companies that want to offset their own carbon emissions.
These intermediaries are required to have good program governance, which means that they have transparent roles and responsibilities, robust procedures for identifying and addressing conflicts of interest, and the ability to avoid misleading claims or misrepresentations. This is a requirement under the Carbon Crediting Program Assessment Framework (CCP) developed by the ICVCM, and it applies to all programs.
It’s also a requirement under the Woodland Carbon Code, which is an additionality standard for woodland creation projects. This requires that a project’s wider benefits such as biodiversity, habitat conservation, and improved wildlife habitat are included in the project’s extra-carbon outputs when it is validated by the WCC.
During the validation process, all expected income streams and credit sales should be assessed against this additionality test. If they are not, the project may be deemed to not deliver the wider benefits promised when it was validated, and its carbon units may be canceled in a registry.
Many of these types of projects are already being questioned in the credit market, and EDF is currently researching how to improve their integrity. Our work focuses on the three key issues of additionality, leakage and permanence.