What are carbon credits and why are they important for Cop30

A carbon credit is a certificate of reduction or capture of CO2 equivalent, awarded to a project. However, not all projects that reduce and capture emissions are automatically eligible to become credits. They must meet minimum criteria: the reduction or capture must be permanent, real, measurable, the project must have regulatory additionality (i.e. not simply meet a legal obligation) and economic additionality. That is, it must demonstrate that the sale of the environmental benefit is its fundamental livelihood.

Carbon credits are used to offset the greenhouse gas emissions of a producer, company or country. By purchasing them, they finance projects that reduce, avoid or remove emissions from the atmosphere. The credits are issued by third parties and certified by specialised bodies. The International Emissions Trading Association maintains a list of standards recognised internationally as the most reliable. One credit is equivalent to one tonne of CO2 equivalent avoided or removed from the atmosphere. In purchasing, it responds to market rules.

"Carbon credits have their origin in the Kyoto Protocol, which was adopted in 1997 and came into force in 2005. With the aim of cutting emissions, the idea was to optimise resources by rewarding - among all available technologies - the solution with the lowest marginal cost of CO2 abatement. A mechanism that implies simple projects, with low initial prices, which will grow as demand increases, allowing more expensive technologies to enter the market,' explains Andrea Ronchi, founder and CEO of the consultancy firm CO2 Advisor .

A few examples of projects that generate carbon credits: "They are nature- or technology-based," answers Ronchi: "They range from the prevention of deforestation, for example, and the conservation of wetlands, which are low-cost solutions, to sustainable fuels, renewable energy, electric mobility, reforestation and nature restoration actions, to activities such as generative agriculture, carbon capture and storage (Ccs) and biochar, i.e. charcoal to be stored on the ground. All these solutions do not have to enjoy state incentives, given for environmental benefit, which cannot be counted twice'.

Carbon credits are first framed in Article 6 of the 2015 Paris Agreement, which establishes mechanisms for voluntary cooperation between countries to achieve climate goals, including carbon markets and other non-market-based solutions. At Cop29 in Baku a version defining more precise rules was approved, "at Cop30, which opens in Belém in Brazil on 10 November, we expect further implementation, with a reference scheme that can be used by all countries to make agreements. All the more so after the EU Environment Council's recent decision to extend the use of credits for member countries to achieve decarbonisation targets with a 5% share for Europe plus a further 5% for each country, again with respect to 1990 levels," Ronchi stressed.