Carbon credits

Reductions in greenhouse gas emissions tradable in the international carbon market, measured in avoided tons of carbon dioxide equivalent (tCO2e).

Currently, there are two types of assets being traded on the market: (i) emission allowances allocated to an existing or imminent system that establishes a cap-and-trade scheme; and (ii) project-based emission reductions, derived from project activities.

In the first one, to avoid penalties, an entity must retain emissions allowances equal to the total emissions of the regulated pollutant, for each commitment period. Allowance permits are created by a regulatory agency and generally distributed to issuers by grant, auction, or a combination of the two. They are withdrawn from the market when there’s the need to reduce emissions of the regulated pollutant. In the second one, the bidders participate in the elaboration and financing of a project that, when compared to business as usual, reduces emissions of greenhouse gases and, on the other hand, acquire emission reductions obtained by the project.

Units provided by the Kyoto Protocol:

– Emission Reduction Units (ERUs) – generated by the Joint Implementation mechanism (Article 6 of the Protocol);
– Certified Emission Reductions (CERs) – derived from CDM projects;
– Assigned Amount Units (AAUs) – corresponding to Emissions Trading (Article 17 of the Protocol); and
– Removal Units (RMUs) – arising from the additional human-induced activities undertaken since 1990 and that have caused variations in greenhouse gas emissions or removals (Article 3, Paragraphs 3 and 4 of the Kyoto Protocol).

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See also

Anthropogenic emissions

Anthropogenic emissions

Emissions produced as a result of human action. For example, large amounts of carbon dioxide are being released into the atmosphere by activities such as the burning of fossil fuels, agriculture, cement making, and so on.



Reducing Emissions from Deforestation and Forest Degradation - the concept has evolved to REDD+.