Writer: William Daniel, George K. KIONGSON
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Figure 1. A flowchart explaining the cycle of carbon credits
In the face of escalating climate change concerns and tightening environmental regulations, businesses are under increasing pressure to reduce emissions. This has led to a global carbon market growth, where organizations can buy and sell carbon credits to offset their carbon footprint. Carbon credits are equivalent to one ton of carbon dioxide or an equivalent amount of other greenhouse gasses [i] and are categorized into compliance and voluntary markets.
Compliance Market vs. Voluntary Market
In the compliance market, government authorities establish emission limits for specific sectors, requiring businesses to stay within these bounds. Companies can purchase additional credits if they surpass the limits or sell excess credits. On the other hand, the voluntary market allows individuals, businesses, and organizations to participate voluntarily[ii], often driven by stakeholder pressure, consumer demand, or effective marketing strategies.
Understanding Carbon Projects: Reduction, Removal, Avoidance
It’s worth noting that certain projects may exhibit characteristics of both reduction and avoidance categories, as their classification can sometimes depend on the perspective and project details.
Carbon credits are generated through reduction, removal, or avoidance projects. Reduction projects focus on minimizing emissions from specific activities or processes. Examples include energy efficiency improvements, renewable energy adoption, carbon capture and storage (CCS)[iii], and sustainable transportation. The success of reduction projects is measured by the decrease in emissions compared to baseline.
Figure 2. Carbon Capture and Storage Chart Designed by macrovector - Freepik.com
While reduction and removal may seem interchangeable, they are different. Removal projects such as direct air capture (DAC) technology[iv], afforestation, and reforestation, actively extract carbon from the atmosphere, contributing to a global reduction in carbon levels. Measurements are based on the tons of CO2 removed.
Figure 3. DAC and CCS technology comparison
The third category, carbon avoidance projects, aims to prevent the release of greenhouse gas emissions that would occur without intervention. Examples include forest protection against deforestation and sustainable waste management. Success is measured by the number of emissions prevented[v].
Table 1. Comparison of Carbon Credit Project Categories
Reduction | Removal | Avoidance[AS2] | |
Focus | Minimizing emissions from specific activities or processes | Actively extracting carbon from the atmosphere | Preventing the release of greenhouse gas emissions |
Examples | Renewable energy adoption, Energy efficiency upgrade | Afforestation or reforestation, Direct air capture | Forest protection, sustainable waste management, renewable energy |
Measurement | Decreased emissions compared to baseline | Tons of CO2 removed from the atmosphere | Amount of emission removed/prevented |
Timeframe | Immediate results | It takes time to demonstrate the full effect | Takes time to demonstrate the full effect |
Navigating Risks and Time Frame
Reduction projects yield immediate results in emissions reduction, whereas removal and avoidance may take time to demonstrate their full impact. However, each project typeface risks during implementation. For instance, direct air capture technology is expensive and energy-intensive[vi], potentially offsetting its carbon reduction benefits, but the permanence of carbon storage also raises concerns[vii]. Avoidance projects require careful assessment of the risk of emissions displacement. Successfully protecting an area from deforestation may inadvertently worsen deforestation in another area[viii]. Recognizing these distinctions is crucial for businesses navigating the complex landscape of carbon credit projects and markets.
Summary and Call to Action
In summary, businesses seeking sustainability practices must clearly understand the carbon market and project categories. For those interested in delving deeper, Mt. Stonegate offers comprehensive solutions and expertise in the Asian market. Contact us to lead your organization toward a sustainable future.
References:
“Carbon Removal vs Carbon Avoidance Projects · Abatable,” March 30, 2022. https://www.abatable.com/blog/carbon-removal-vs-carbon-avoidance-projects.
Daugherty, Greg. “Carbon Markets: What They Are and How They Work.” Investopedia, October 13, 2023. https://www.investopedia.com/carbon-markets-7972128.
DiFelice, Oakley Shelton-Thomas, Mia. “Direct Air Capture: 5 Things You Need to Know About This Climate Scam.” Food & Water Watch, January 19, 2023. https://www.foodandwaterwatch.org/2023/01/19/direct-air-capture-climate-scam/.
Shelton-Thomas, Mia DiFelice, Oakley. “Why Carbon Storage Is a Bad Idea.” Food & Water Watch, September 6, 2023. https://www.foodandwaterwatch.org/2023/09/06/carbon-storage-bad-idea/.
UNDP Climate Promise. “What Are Carbon Markets and Why Are They Important?,” May 18, 2022. https://climatepromise.undp.org/news-and-stories/what-are-carbon-markets-and-why-are-they-important.
“What Are the Different Carbon Reduction Projects Types?,” February 7, 2023. https://climateseed.com/blog/what-are-the-different-carbon-reduction-projects-types.
Zuo, Jian, Yashan Zhong, Yun Yang, Cong Fu, Xiangzhen He, Bo Bao, and Feng Qian. “Analysis of Carbon Emission, Carbon Displacement and Heterogeneity of Guangdong Power Industry.” Energy Reports, The 2021 7th International Conference on Advances in Energy Resources and Environment Engineering, 8 (September 1, 2022): 438–50. https://doi.org/10.1016/j.egyr.2022.03.110.
[i] “What Are Carbon Markets and Why Are They Important?”
[ii] Daugherty, “Carbon Markets.”
[iii] “What Are the Different Carbon Reduction Projects Types?”
[iv] DiFelice, “Direct Air Capture.”
[v] “Carbon Removal vs Carbon Avoidance Projects · Abatable.”
[vi] DiFelice, “Direct Air Capture.”
[vii] Shelton-Thomas, “Why Carbon Storage Is a Bad Idea.”
[viii] Zuo et al., “Analysis of Carbon Emission, Carbon Displacement and Heterogeneity of Guangdong Power Industry.”