How Carbon Credits Are Created?

How Carbon Credits Are Created

Carbon credits are generated by 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.
  • Re/afforestation
  • Soil carbon sequestration
  • Biochar.
  • Carbon capture, utilisation and storage (CCUS)
  • Direct air capture (DAC)
  • Bioenergy with carbon capture and storage (BECCS)
At Likvidi, we focus on nature-based carbon credits. These projects focus on carbon stored in organisms like trees, plants and soils through the process of photosynthesis. A typical mature tree can absorb around 21kg of CO2 per year, so a plot of approximately 48 trees can be capable of creating one carbon credit per year.
It’s not as simple as just planting trees, however, there are various ways credits can be produced…
  • Reforestation: Restocking existing forests that have been depleted through deforestation, logging, or fires.
  • Afforestation: Planting new trees where there were no trees before. Soil sequestration: Capturing and storing carbon in agricultural soils.
Avoidance or reduction:
  • Avoided Deforestation/REDD+: Protecting forests that would have otherwise been cleared for crops or grassland. This prevents carbon from being released into the atmosphere, which instead remains stored in the biomass.
  • Improved Forest Management: Increasing carbon stored in forests, for example by increasing the average age in timber farms by delaying harvest periods.
  • No-Till Farming: Keeping carbon in the ground by not disturbing the soil through tillage.
For a carbon offset to be valid it has to pass the principle of additionality. This means that the reductions in emissions achieved by a project must only have been possible due to the existence of the carbon market.
For example, a business’s carbon reduction wouldn’t be additional if it was done simply to save money, but it would be if it was only made possible by the funding made available from the sale of those carbon credits.
To earn verification a project must submit to at least three rounds of auditing by regulators, which examine their methodology, project design, and monitoring of results. Even after verification, a third-party auditor must regularly assess the project to ensure that standards are being followed and that carbon credit production is accurate.
Support local communities
The carbon credit market helps to incentivise climate-positive projects by making it financially viable for landowners, farmers and project leaders globally to conserve rather than destroy.
Without a carbon market, a forest in a developing country may be sacrificed for the short term interests of local communities through deforestation and subsequent farming on these new lands.
In a carbon market situation however, conservation of natural habitat provides communities with an income and various co-benefits often found in carbon projects, while protecting the environment at the same time.
A range of benefits
Nature based projects are beneficial not just because they produce carbon credits, but they also bring myriad additional benefits for local wildlife and communities.
Rimba Raya is the world’s largest REDD+ project and provides Likvidi with carbon credits. While protecting over 84,000 ha of high conservation value tropical peat forest from destruction, it also develops livelihood programmes for surrounding villages. Each one of the 17 UN Sustainable Development Goals is addressed by this project, making it a truly massive benefit to the local community. This is yet another reason to support nature based carbon projects.