Types of Carbon Credit

Types of Carbon Credits

Type:  CER Credit – Certified Emission Reductions
Standard: CDM projects under Kyoto
Description: A CER is a type of carbon credit that is generated under Kyoto’s Clean Development Mechanism (CDM). CER’s are generated by a CDM project and offer companies in industrialised countries to invest in emission reducing projects in developing nations. CER’s may be sold to a developed country in order to help meet their Kyoto emission targets. CER credits are highly regulated and independently verified and as such, emissions reductions must be proved to be real, measurable, permanent.
Type:  ERU Credit – Emission Reduction Units
Standard: JI projects under Kyoto
Description: An ERU is generated under Kyoto’s Joint Implementation (JI) mechanism. The JI mechanism was created to allow emission permits to be traded from one industrialised country to another. ERU’s are usually generated via a transnational investment from one company to another.
Type:  REC Credit – Renewable Energy Certificates
Standard: Office of the Renewable Energy Regulator, Australia
Description: An REC is a form of carbon credit that can be traded by electricity retailers and other businesses to meet their legal requirements. REC’s are surrendered by a business to demonstrate they have complied with the Australian Governments mandatory renewable energy targets. Each REC is equal to one megawatt hour of renewable electricity.
Type:  NGAC Credit – NSW Greenhouse Abatement Certificates
Standard: Greenhouse Gas Abatement Scheme
Description: A NGAC is a type of carbon credit that can be traded as a commodity within the NSW Greenhouse Gas Abatement Scheme (GGAS). The NSW GGAS is a mandatory greenhouse gas emissions trading scheme in Australia, associated with the consumption of electricity in New South Wales.

Type: EUA – European Union Allowance

Standard: European Trading Scheme

Description: European trading Allowances or EUAs are the quotas allocated by the National Allocation Plans within the network of the EU Trading Scheme. One EUA represents the right to emit 1 tonne of carbon dioxide or co2. Industrial sites are allowed to utilise CERS/ERUs instead of EUAs, to a certain limit, which varies from country to country. Trading these credits enables companies to meet emissions limits, whilst facilitating profit for environmentally friendly projects. This market based approach is beneficial to the environment and for businesses.

Type:  VER’s – Verified Emission Reductions
Standard: Voluntary Market
Description: A VER is generated by a wide-range of project types, from small scale community driven projects, to large renewable energy projects, and can be traded within the voluntary market without being subject to the Kyoto protocol. They can also be used voluntarily by businesses and organisations to offset carbon emissions.  VERs are generated by projects verified by a third party, but without the high costs associated with CERs, which are subject to much more stringent regulation, pushing up the price.

VERs are further separated into the following criteria-

  • VER “VOS”: INCIS (International Carbon Investors and Services) has proposed the Voluntary Offset Standard. This Standard brings the voluntary market up to the level of the regulated and standardised procedures of the compliance market, but extends the eligible geographical area beyond those countries which have sanctioned the Kyoto Protocol.
  • VER “Gold Standard”: The Gold Standard was delineated in 2006 and is supported by prominent environmental groups, such as WWF. It is a premium quality label, Kyoto equivalent, which ensures the successful integration of stakeholder feedback, and integrity of environmental impact assessments.
  • VCS (Voluntary Carbon Standard): It has been designed by the International Emissions Trading Association (IETA), and non-profit organisations The Climate Group and WWF. It ensures local community participation and bears a strong sustainable development dimension.
  • VER+: The certification body of TUV SUD (an entity accredited by the UNFCCC to assess compliance projects) has created the VER + standard, which provides a more flexible approach on the utilised baseline and monitoring methodology.

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