How to Select Carbon Credits

What is a carbon credit? 

A carbon credit represents 1 metric tonne of carbon dioxide reduced or removed from the atmosphere. A verified credit can be used against an organisation’s carbon footprint to offset the company's negative climate impacts. 

What do you need to consider when buying carbon credits? 

• Project type
• Regionality
  
• Registry
• Vintage
• Additional co-benefits

How do these options affect credit pricing? 

1. Project type

Carbon offsets can be generated by different types of projects, each classified under the following categories (in order of market share):

• Agriculture, forestry and other land use (42%)
• Renewable energy (33%)
• Chemical and industrial processes including energy efficiency and fuel switching (12%)
• Waste disposal/management (6%)
• Household/community devices such as cookstoves (6%)
• Transportation, carbon capture and storage and long-lived carbon removal (<1%)

Credits can also be categorised into two classes: carbon reduction credits and carbon removals.

2. Regionality

Prices can vary materially for the same project in a different location due to implementation and project delivery costs, meaning two projects of the same type with similar credentials could have drastically different pricing. Desirable projects include those located in niche territories, located within the operating jurisdictions of listed corporations and European projects.

3. Registry

Registries provide the framework to oversee the registration, verification and credit issuance of projects. The traditional big four registries are:

- VERRA 

The single largest registry, which is global and mostly oriented towards nature-based solutions. 

- Gold Standard 

Mostly specialised in energy efficiency and technology-based solutions. 

- The Climate Action Reserve (CAR) and the American Carbon Registry (ACR) 

US-based registries which almost exclusively register projects within the North American region. 

4. Vintage

Each carbon credit is marked with a vintage year, which dates the unit. The vintage of a carbon credit corresponds to the year in which the environmental benefit of that credit was delivered. In the voluntary carbon market, credits tend to become less desirable as vintages age. The perception of older vintages being worth less creates a discount for buyers wanting to support certain projects in line with their procurement budgets.

5. Additional co-benefits

Offsetting projects can also generate other positive impacts referred to as co-benefits. The United Nations’ Sustainable Developments Goals is the most widely adopted framework to demonstrate this type of additional value. While not directly linked to the pricing or integrity of the carbon credit, the more SDGs associated with a project, the more marketable the project is to end users.