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CARBON CREDITS
In practical terms, carbon
emissions are offset through a specific financial tool : carbon
credits.
Carbon credits top of page
Carbon credits are units
assigned to project sponsors who reduce greenhouse gas emissions. Project
sponsors can then sell these credits to help finance their projects.
For example, a
hydroelectric power plant avoids the emission of 30,000 t CO2 eq per
year (since it avoids burning coal in a coal-powered plant to produce the
same quantity of electricity). The project sponsor (often the plant operator)
is assigned 30,000 carbon credits each accounting for 1 ton of avoided CO2 eq.
The sponsor sells his carbon credits to an organization such as Climat Mundi
for example. The corresponding revenue enables the sponsor to make their
installations viable.
The term "carbon
credit" is a generic term signifying several categories the best known
being CERs and the VERs.
Who
allocates carbon credits and how (case of CER)? top of page
The most widespread case is
that of Kyoto Protocol certified projects known as "clean development
mechanisms" (CDM) that issue a certain type of carbon credit called CER
(certified emission reduction). CER type carbon credits are allocated by the
United Nations (to be exact, by the ..."Clean Development Mechanism
Executive Board of the United Nations Framework Convention on Climate
Change"... what a mouthful!), in line with a very precise mechanism:
1. Project sponsors must
use a methodology certified by the United Nations to show
that their project meets certain criteria (measurability, additionality,
absence of double accounts, a monitoring plan,...).
2. It is then necessary to
have calculations checked by a consultant accredited by the UnitedNations (DOE, designated operational entity in
UN-speak). To date, there are some ten firms accredited by the United
Nations. These are mostly companies specialized in ISO certification, sea or
oil certification, etc... This procedure is called validation
and it gives rise to a validation report sent
to the UN.
3. The project must then beregistered by the United Nations.
4. Once the project is registered, the
reality of the reductions generated by the project must be checked once a year.
This check must also be performed by a consultant accredited by the United
Nations (see point 2 above). In concrete terms, this consists in examining how
much the hydroelectric power station really produces in the year in question.
For example, if the year was very rainy, the plant will have had a lot of water
to process and therefore will have produced a lot of electric power thus
avoiding a large quantity of CO2 emissions that would have resulted had the
same electricity been generated in a coal-powered plant. On the other hand, if
the year was relatively dry, fewer CO2 emissions would have been avoided (since
the coal-powered plant would have operated in its place). This procedure is
called verification and gives rise to a verificationreport sent to the UN.
5. On the basis of the
verification report, the UN allocates carbon credits to the
project sponsor. In concrete terms, it credits the sponsor's "carbon
account" just like a bank account except it does not contain euros or
dollars but rather carbon credits.
6. Once in possession of the carbon
credits, the project sponsor can sell them and obtain revenue to help finance
his project.
CERs are the only carbon
credits usable by players having regulatory obligations concerning greenhouse
gas emissions (developed countries who signed the
Kyoto protocol or industrialists subject to
the European emission allowance trading scheme).
Who
allocates carbon credits and how (case of VERs)? top of page
VER (verified emission
reductions) are "unofficial" carbon credits, i.e. not allocated by
the UN. They correspond to reductions in emissions that have not followed the
entire UN procedure.
For example, a project that
meets the UN's technical criteria (measurability, additionality, a monitoring
plan,...) but located in a country that has not ratified the
Kyoto
protocol (
Turkey
for example), will not be allocated
carbon credits by the UN in the form of CERs. It may however follow the same
technical procedure and be assigned VERs.
Similarly, the UN only
recognizes reductions in emissions generated by a project after
its registration date. However the UN's administrative procedures are
unwieldy and it may happen that a project starts to operate (and therefore
generate emission reductions) before it is registered. In this
case, reductions of emissions generated before registration will not
give rise to allocation of CERs, but may give rise to allocation of VERs.
VER are not allocated by
the United Nations but result from an agreement between the project sponsor and
the buyer (Climat Mundi for example).
Which carbon credits are used by Climat Mundi? top of page
This depends on the project.
The Mexican project is a CDM project (No. 649) for which Climat Mundi
bought CERs.
The small Chinese hydraulic project is a CDM project (No. 1193), for
which Climat Mundi bought VERs. These VERs correspond to the emission
reductions generated before the registered by the United Nations.
The Eritrea
project is not a CDM project. The
VERs are sold to Climat Mundi by the Eritrean energy ministry, on the basis of
a verification report established by an independent consultant (Berkeley Lab.
from the
University
of
California).
In practical terms, when
you offset your emissions on our site, we assign you 10% of CERs and 90% of
VERs in our registry.
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