Carbopedia

Types of Carbon Credits

Essentially, the types of carbon credits can be split into two forms, those within the voluntary market and those within the compliance market. Each type of carbon credit adheres to a particular standard or certification.

Compliance Carbon Credits

More information on the compliance market can be found here.

Certified Emission Reduction (CER) units

The most common type of compliance credit is a CER (Certified Emission Reduction unit) which originates from projects in developing counties. Certification and overall approval of these abatement projects and their credits is known as the Clean Development Mechanism (CDM).

Emission Reduction Unit (ERU)

Like CER in developing nations, within developed nations, a mechanism known as Joint Implementation or JI, produces compliance credits referred to as Emission Reduction Units or ERUs.

New South Wales Greenhouse Gas Abatement Certificate (NGAC)

The New South Wales Greenhouse Abatement Certificate (NGAC) certification process is comprehensive. It includes Kyoto Protocol measures, but goes beyond these. In summary the NGAC certification process ensures the following:

  • That each NGAC represents one tonne of carbon dioxide stored for at least 100 years.
  • That the trees have been planted since 1990.
  • That the trees weren't planted on old growth forest cleared land (the land must have been clear prior to 1990).
  • That should the tree from which your carbon credit came come to any harm within 100 years of your purchase eg. Fire, disease, logging; that carbon credit will be replaced immediately from another source.

Voluntary Carbon Credits

More information on the voluntary market can be found here. The credit types below are just a sample of the most commonly used products in Australia and globally. Many more types exist overseas and if you want more information on these, please contact us.

Voluntary Carbon Unit (VCU) or Voluntary Carbon Standard (VCS) credit

The VCS Programme provides a robust, global standard for approval of credible voluntary carbon credits.

VCS credits or Voluntary Carbon Units (VCU) must be real, the abatement must have occurred, they must be additional by going beyond business-as-usual activities, be measurable, permanent, not temporarily displace emissions, the findings need to be independently verified and unique so they cannot be used more than once to offset emissions. The VCS is the most widely known and chosen standards in the voluntary market due to it's Kyoto compatibility as well as it's ability to manage a wide range of project types and methodologies.

Verified (or Voluntary) Emissions Reduction (VER) and Gold Standard VER

The most popular type of carbon credit used to offset emissions around the world voluntarily is a VER, a Verified or Voluntary Emission Reduction unit and there are many different types. Before CDM or JI projects deliver credits used for Compliance purposes such as CERs and ERUs they can produce VERs. These credits can be verified to a number of specific standards, including the Gold Standard. Not all projects go on to register within the CDM or JI, often due to the size of the project and the inhibitive costs associated with compliance registration, so their choice of one or more of these voluntary standards is made based on it's overall viability and compatibility to them.

Renewable Energy Certificate (REC)

A REC is not a carbon credit that represents one tonne of CO2e emissions but rather a unit that relates to how much CO2e is saved by the adoption of renewable energy and how efficiently one mega watt hour (MWh) of electricity can be produced. This can vary from as little as a 500 kilos of CO2e, to as much as almost two tonnes from older, less efficient power stations. Like carbon credits, in an attempt to faze out and replace traditional, emission intensive activities, RECs provide financial subsidies for the power sector to help renewable energy projects become more viable around the world.

New technology and innovations to existing technology are rapidly being realised in areas such as; solar Photo Voltaic (PV) cells, wind farms, subterranean geothermal power plants, wave collection technology, hydroelectric, tidal power, renewable biomass and more. Depending on their location, these projects can produce RECs but as they also displace CO2e they can often be a more viable project if a choice was made in favour of producing carbon credits instead, for example VCUs, VERs or CERs.