A carbon credit usually represents one tonne of greenhouse-gas emissions reduced or removed from the atmosphere, expressed as carbon dioxide equivalent. However, the figure “one tonne” describes only the quantity; the real quality and value of a credit also depend on how the emissions reduction was generated, measured, and verified.
How much is one carbon credit equivalent to?
In common carbon-market usage, one carbon credit represents one tonne of carbon dioxide equivalent, abbreviated tCO₂e, that has been reduced or removed from the atmosphere through an activity or project meeting specified requirements.
It is important to note that a carbon credit does not necessarily mean that exactly one tonne of CO₂ has been sucked out of the air. Credits can be generated from two main types of activity:
- Reducing or avoiding greenhouse-gas emissions relative to a baseline emissions scenario;
- Removing greenhouse gases from the atmosphere and storing them through natural or technological solutions.
For example, credits may come from landfill methane capture, energy-efficiency improvements, forest protection and restoration, or carbon-capture technologies. Which activities are eligible to issue credits depends on the applicable standard and methodology.
Why are credits measured in CO₂ equivalent?
Human activities emit not only carbon dioxide but also other greenhouse gases such as methane, nitrous oxide, and certain industrial gases. Each gas differs in its warming effect and atmospheric lifetime.
To provide a common unit of measurement, emissions of these gases are converted into carbon dioxide equivalent based on each gas’s global warming potential under the selected methodology.
This allows emissions reductions from different sources to be quantified using the same unit. For example, methane captured and treated can be converted into the corresponding tonnes of CO₂e, forming the basis for determining how many credits may be issued.
How is a carbon credit created?
An emissions-reduction activity does not automatically become a carbon credit. Before credits can be issued, the claimed greenhouse-gas reduction or removal must pass through a multi-step process.
First, the project developer must design the project under an appropriate methodology, define the project boundary, and establish a baseline scenario. The baseline describes the emissions that would likely have occurred if the project had not been implemented.
Next, the project must demonstrate that the emissions reduction is additional. In other words, the result should occur because of the project rather than something that would have happened anyway under normal conditions.
Implementation data are then monitored, calculated, and reported. An independent validation or verification body checks the methodology, data, and emissions-reduction results. Only after the programme requirements have been met are the corresponding credits issued and recorded in a registry.
Each credit generally has an identifier so that its issuance, transfer, and use can be tracked. When a credit is used for offsetting or a climate claim, it should be retired or cancelled in the registry to reduce the risk that the same unit is used more than once.
One tonne of CO₂e, but very different quality
As a unit of measurement, different credits may all represent one tonne of CO₂e. That does not mean they all deliver the same climate value.
Credit quality is commonly assessed against factors such as:
- Additionality: Would the emissions reduction genuinely occur only because of the project?
- Robust quantification: Are the baseline, data, and calculation methods rigorous?
- Permanence: Is there a risk that removed carbon could be released back into the atmosphere?
- Leakage risk: Could reducing emissions in one place cause emissions to increase somewhere else?
- No double counting: Could the same emissions-reduction outcome be recorded or claimed by more than one party?
- Independent verification: Have the project and its results been checked by a competent independent body?
- Environmental and social impacts: Does the project apply appropriate safeguards and contribute to sustainable development?
- Transparency: Can information about the project, methodology, issuance date, and credit status be traced?
For that reason, price differences between credits are not simply about each unit representing “one tonne of carbon”. The crediting method, project type, vintage of the reduction, level of risk, co-benefits, and market demand can all affect a credit’s value.
How are carbon credits different from emissions allowances?
Carbon credits and emissions allowances can both be expressed in tonnes of CO₂e, but the two instruments are fundamentally different.
A carbon credit is generated from an eligible project, programme, or activity that reduces or removes greenhouse-gas emissions. An emissions allowance, by contrast, is the amount of greenhouse gases that a competent authority permits a regulated facility to emit during a specified period.
Under Vietnamese regulations, one greenhouse-gas emissions allowance represents the right to emit one tonne of CO₂ or one tonne of CO₂ equivalent. A facility allocated allowances must surrender enough allowances to cover emissions within the compliance scope, after any permitted use of carbon credits for offsetting.
Put simply, an allowance represents the right to emit within a regulated limit, while a credit represents a certified result from reducing or removing greenhouse gases.
Buying a credit does not automatically mean emissions have been offset
The fact that an organisation or individual buys and holds a credit does not automatically mean that its emissions have been offset.
To use a credit for offsetting, it normally needs to be retired in the registry so that it can no longer be traded. The accompanying claim should also disclose the number of credits, the emissions period, the scope being offset, the applicable standard, and the project that supplied the credits.
More importantly, a carbon credit does not make emissions at the original source disappear. It is an instrument for recognising and mobilising finance for a greenhouse-gas reduction or removal achieved elsewhere.
Carbon credits should therefore be used within a climate strategy with a clear order of priority: quantify emissions, actively reduce emissions across operations and the value chain, and only then consider suitable credits for the remaining emissions.
What should be checked before choosing a carbon credit?
Before buying or using a credit, a company should not look only at the price. Important information to check includes:
- Which project and country the credit comes from;
- Whether the project reduces emissions or removes greenhouse gases;
- Which methodology and standard are applied;
- When the emissions-reduction result occurred;
- Which organisation performed validation and verification;
- Which registry holds the credit;
- Whether the credit identifier and current status can be traced;
- How the risks of double counting or reversal are addressed;
- Whether the credit has been retired or remains tradable.
A carbon credit is therefore more than the number “one tonne”. Behind that unit should be a measurable climate result that has been verified, transparently tracked, and protected against duplicate use.
