Generating carbon credits

• The host and investor country’s participation in the project is voluntary
• The carbon credits are real and measurable and contribute to sustainable development
• The carbon credits are additional to what would have occurred in the absence of the project activity

To meet the first criterion, the project must obtain approval from the DNAs (Designated National Authorities) in both the country in which the project is being implemented and the country investing in the project.

The second criterion is based on the following equation:

ERy = BEy - PEy - LEy

ERy     Emission reductions in year y
BEy     Baseline emissions in the absence of the project activity in year y
PEy     Project emissions in year y
LEγ     Leakage emissions in year y

During the implementation of the project, this calculation must be validated and verified by a DOE (Designated Operational Entity) such as DNV, SGS or TÜV SÜD, and later approved by UNFCCC Executive Board. It is up to the host country to decide whether it contributes to sustainable development, which is stated in the host country DNA’s approval of the project (Letter of Approval).

The third criterion of additionality is the core of CDM/JI projects and is based on the fact that carbon credits cannot be generated by emission reductions that would have occurred anyway in a business-as-usual scenario, in other words by projects that occur without the incentive of emission credit sales.

Looking at it the other way around, only projects that need the extra revenue to overcome obstacles to implementation can obtain carbon credits for their emission reductions.

Global warming potential of greenhouse gases whose reduction can generate carbon credits:
 

Mitigating Technologies