How Carbon Credits Are Created?

How Carbon Credits Are Created

Carbon credits are generated through the removal, reduction, or avoidance of carbon emissions. But how is this achieved? Broadly, most carbon credits fall into one of two categories: nature-based or technology-based.

Nature-based:

• Re/afforestation

• Soil carbon sequestration

• Biochar.

Technology-based:

• Carbon capture, utilisation and storage (CCUS)

• Direct air capture (DAC)

• Bioenergy with carbon capture and storage (BECCS)

At Likvidi, our focus encompasses a diverse range of carbon credit types, including nature-based, biochar, and direct air capture. Our nature-based projects primarily target carbon sequestration in organisms such as trees, plants, and soils, harnessing the natural process of photosynthesis. For example, a typical mature tree can absorb about 21kg of CO2 annually, meaning a grove of approximately 48 trees has the potential to generate one carbon credit each year.

In addition to nature-based solutions, we also support biochar projects. Biochar is a stable, carbon-rich form of charcoal used to lock carbon into the soil, effectively removing it from the atmosphere. This method not only aids in carbon sequestration but also enhances soil fertility and agricultural productivity.

Furthermore, our portfolios includes projects focusing on direct air capture technology. This innovative approach involves mechanical systems that extract CO2 directly from the atmosphere. The captured CO2 can then be stored underground or utilized in various industrial applications, contributing to the reduction of atmospheric carbon levels.

Additionality

For a carbon offset to be valid, it must adhere to the principle of additionality. This means that the emissions reductions achieved by a project would not have been possible without the existence of the carbon market.

For instance, a business’s carbon reduction wouldn’t be considered additional if it were merely done to save money. However, it would be if made possible by funding from the sale of carbon credits.

To earn verification, a project must undergo at least three rounds of auditing by regulators. These audits examine the project's methodology, design, and monitoring of results. Even after verification, a third-party auditor must regularly assess the project to ensure compliance with standards and the accuracy of carbon credit production.

Support local communities

The carbon credit market helps incentivize climate-positive projects, making it financially viable for landowners, farmers, and project leaders globally to choose conservation over destruction.

Without a carbon market, a forest in a developing country might be sacrificed for the short-term interests of local communities through deforestation and subsequent farming on these new lands.

In contrast, a carbon market situation allows for the conservation of natural habitats, providing communities with an income and various co-benefits often associated with carbon projects, while protecting the environment simultaneously.