Definition and proper use of the "Carbon Credit
Carbon credit is an equivalence measure used in the fight against climate change. In response to international commitments such as the Kyoto Protocol and the 2015 Paris Agreement to reduce GHG emissions, this mechanism has become essential for offsetting residual emissions.
In the interests of sustainable development, and in order to meet the quotas set, the Kyoto Protocol laid the foundations for an international commitment to reduce GHG emissions, and paved the way for other agreements. As a reminder, the Kyoto Protocol, adopted in 1997 as part of the United Nations Framework Convention on Climate Change, aims to improve the global environment by adopting a comprehensive decarbonization strategy.
It also introduces a flexibility system, comprising the Clean Development Mechanism (CDM) and the Joint Implementation (JI) mechanism. These mechanisms enable industrialized countries to offset part of their emissions by financing emission reduction projects in developing countries. Carbon credits are the unit of measurement for these offset projects or carbon contributions.
This is because, despite our efforts to reduce emissions, there will always be emissions that cannot be avoided or significantly reduced, known as residual greenhouse gas emissions. To reduce these, organizations will support carbon offset or carbon contribution projects that reduce emissions elsewhere. They therefore purchase and use these carbon credits, representing equivalent emissions reductions, to limit the impact of their activities.
Industrial facilities in France are covered by these mechanisms and can participate in auctions to obtain carbon credits. Prices vary according to European markets and the level of demand. Trading carbon credits helps to meet targets.
Carbon credits are often generated by these projects or by carbon sequestration, helping to reduce a nation's or company's carbon footprint. Each year, new eligible projects are assessed according to precise criteria to obtain carbon credits.
As a reminder, carbon sequestration captures and stores CO2 from the atmosphere in order to maintain it in a sustainable manner.
There are different types of projects, such as :
🔆 renewable energies
🌲 reforestation and forest conservation
⚡ energy efficiency
♻️ waste management
🌾 sustainable agriculture
These projects, like those for waste management, sustainable agriculture or renewable energies, are certified by recognized standards and mechanisms, such as the Kyoto Protocol's CDM or the voluntary Gold Standard or Verified Carbon Standard (VCS). This guarantees the credibility and transparency of the emissions reductions achieved by these projects.
In France, carbon credits have begun to gain in importance at the corporate level. Companies in various sectors are seeking to offset their residual, incompressible emissions as part of their emission reduction plans.
2. What is a carbon credit used for?
What is a carbon credit?
A carbon credit is considered to be a unit equivalent to one tonne of CO2 avoided or sequestered. Carbon credits are awarded to GHG emission reduction projects that meet certain criteria. It is a certification of carbon absorption.
In order for these projects to be certified as capable of emitting carbon credits, the methodologies agree on 4 essential criteria. In France, eligible facilities can participate in emission allowance auctions to obtain the carbon credits required for their activity.
🗺️Tout First of all, the project promoter must show that without the money from the sale of carbon credits, the project could not have been implemented and therefore would not have enabled carbon sequestration.
📉 Next, the amount of CO2 avoided or sequestered must be quantifiable on the basis of a recognized methodology.
🔢Tons of CO2 sold as carbon credits must be verifiable and accounted for every year.
🗓️L Carbon avoidance or sequestration must take place over the long term (minimum 7 years).
In France, carbon credits can be traded via trading systems such as SEQE. These systems are set up to regulate CO2 emissions from industrial facilities.
Projects eligible for the sale of carbon credits fall into two categories:
🟢Avoidance projects: developing renewable energy or using energy more efficiently;
🟢Sequestration projects: development of natural carbon sinks (forests, oceans, soils) or industrial sinks (machines that capture CO2 and store it in rock).
What are carbon credits used for?
Project sponsors can sell their carbon credits to companies, local authorities or individuals who are voluntarily reducing their emissions and aiming for carbon neutrality (see definition).
For companies, this contribution/compensation strategy follows the completion of a GHG inventory and the implementation of a reduction plan.
In France, carbon credit prices fluctuate according to supply and demand on European markets.
The carbon contribution is designed to offset residual, incompressible greenhouse gas emissions. It is based on the principle that GHG emissions emitted at one location can be "neutralized" by participation in a GHG sequestration and reduction project carried out at another location.
When carrying out a GHG inventory, an organization makes an inventory of all its emissions and implements an action plan to reduce them. When its emissions can no longer be reduced, it can contribute to the development of projects in favour of the environment by purchasing carbon credits until it achieves neutrality, if desired.
💶🌿Carbon credits are a real currency in the fight against global warming.
The importance of reducing before thinking about compensating/contributing
It is important to stress that the carbon contribution can only be used after a maximum reduction in emissions has been achieved, or at least before a reduction plan has been put in place.
A low-carbon strategy is the way forward for businesses. They must "play their part" in reducing global emissions and in our country's energy transition.
➡️ A carbon strategy begins with a complete accounting of an organization's emissions, by means of a GHG inventory®. Global Climate Initiatives offers companies of all sizes and in all sectors the possibility of carrying out a complete and compliant assessment online, with guidance every step of the way.
➡️ Once the accounting has been carried out, the platform proposes to organize the low-carbon strategy by identifying the major emission points and setting up a reduction action plan.
➡️ Once emissions have been reduced as far as possible, the platform supports companies in making a contribution to the environment through carbon credit-generating projects, but this is the final stage in its low-carbon strategy.
In France, the emission levels of the various sectors are regularly assessed to ensure a continuous reduction in emissions.
Ensure the source of these funds
There are many projects on the carbon market that are not certified. If a company really wants to contribute to the fight against climate change, it must ensure that its projects are legitimate.
Global Climate Initiatives offers companies wishing to do more than just reduce their emissions a page on its platform listing certified contribution projects in line with the Sustainable Development Goals (SDGs). Companies working directly on the GCI platform are sure to have a real impact. The experts at Global Climate Initiatives can advise you on the purchase of quality carbon credits in line with their own contribution aspirations (type of project, geographical area, multi-year plan, etc.).
For further information on indirect emissions, we offer a guide to scopes 1, 2 and 3 of the carbon footprint.
