The 3 types of carbon credits

Voluntary offsetting through carbon credits enables the neutralization of greenhouse gas (GHG) emissions by financing concrete projects aimed at reducing or capturing them. These diverse initiatives actively contribute to the transition toward a sustainable future and align with global environmental goals to lower our ecological footprint.

This article explores the various categories of carbon credits, from emission reduction projects at the source to advanced carbon capture technologies and natural carbon sequestration solutions.

 

The 3 types of carbon credits

The voluntary carbon market is vast and offers various distinct types. However, we can broadly categorize carbon credit projects into three main types:

• Credits from emission avoidance or source reduction, such as through energy conversion or energy efficiency;
• Credits from carbon capture technologies using engineering solutions. For instance, sequestration can be achieved by injecting CO2 into underground geological formations like saline aquifers or empty caverns. Other innovative projects, such as Deep Sky, are also under development;
• Credits from GHGs sequestered through natural processes (Nature-based Solutions), where CO2 is captured and then incorporated into various products, preventing it from returning to the atmosphere.

 

Emission reductions at the source

Source reduction credits represent the avoidance and/or reduction of GHG emissions. These reductions must go beyond previous practices or what is commonly accepted. Such credits therefore encourage businesses to exceed the ‘Business As Usual‘ scenario by adopting eco-friendly and innovative practices. Examples include switching from fossil fuels to green energy, improving energy efficiency, and repurposing waste, which are all part of source emission reduction projects.

 

Conversion strategies and energy efficiency

Energy conversion involves transitioning from a high-carbon-intensity energy source per kWh to a low-carbon-intensity energy source.

When transitioning from fossil fuels to green energy (such as geothermal, wind, hydro, nuclear, or solar), GHG emissions associated with fuel combustion are either avoided or reduced. For each kWh generated, the carbon footprint is proportionally lower than before, contributing to a reduction in CO2 emissions.

By implementing energy efficiency measures, the same needs are met with lower energy consumption, further reducing GHG emissions.

For example, torrefied biomass transforms wood residues into clean energy, waste heat recovery makes use of thermal waste, and demand-side management reduces energy consumption in buildings. Additionally, high energy efficiency standards for new buildings and major renovations improve their energy performance and limit environmental impact.

 

Repurposing waste materials to limit emissions

Traditionally, waste materials are sent to landfills, which emit GHGs due to the decomposition of waste. When waste is recycled or composted, GHG emissions are significantly reduced. Even better, when waste materials are repurposed, they can serve as raw materials, eliminating the need for the extraction of new raw materials for product manufacturing.

A great example is a member of Will Solutions‘ Sustainable Community, Lauzon Bois Énergétique, which collects wood residues from various industrial sites. The company avoids the originally intended landfill and the associated GHG emissions from wood decomposition. Lauzon Bois Énergétique then processes these residues into wood pellets for biomass heating. As the popular saying goes, “One person’s waste is another’s treasure!”

Additionally, source reduction projects also encourage innovation and the development and adoption of cleaner, more sustainable technologies.

Lastly, reduction projects are adaptable to the specific needs of different sectors and industries, making them a high-potential project category, flexible with numerous applications and co-benefits that also support sustainable development goals.

 

Emissions sequestered through capture technologies

Greenhouse gas (GHG) capture technologies play a crucial role in achieving carbon neutrality goals. They allow for the capture of significant amounts of CO2 either before or after it is emitted into the atmosphere, thus contributing to the reduction of the overall carbon quota.

These innovative projects provide a technological solution for unavoidable emissions generated by sectors such as industry, agriculture, and transportation.

Technological carbon capture complements emission reduction and avoidance solutions by sequestering residual GHGs that cannot be prevented. By investing in these projects, companies actively participate in the fight against climate change while also driving innovation, research, and the development of green technologies.

Technological innovation in emission capture

Technological innovation focuses on solutions that capture carbon emissions after they have been produced, providing an answer for sectors where it is challenging to directly limit emissions.

Unlike upstream emission reduction approaches, these technologies capture the CO2 already emitted and store it safely, thereby helping to mitigate the environmental impact.

 

Carbon sequestration through ecosystems: A natural solution against GHGs

Natural sequestration projects harness the ability of ecosystems to absorb and store atmospheric carbon, particularly in agricultural soils. Through natural environments like forests, mangroves, or wetlands, carbon is captured via photosynthesis and stored in plant biomass and soil. These ecosystems act as natural carbon sinks, helping to limit greenhouse gas (GHG) emissions.

Preservation and restoration of these habitats maximize their sequestration potential. For example, tree planting or protecting existing forests prevents the release of CO2 due to deforestation, while peatlands, by trapping carbon in favorable conditions, can store it for millennia.

In addition to capturing GHGs, these projects enhance biodiversity and restore natural ecosystems, contributing to climate adaptation. Initiatives like mangrove restoration help regulate the local climate and reduce flood risks, offering multiple environmental benefits.

 

Why are the types of carbon credits important?

It is essential to understand the different types of carbon credits before considering a purchase, as Sébastien Cross, co-founder of BeZero Carbon, puts it: “Some carbon credits perform better than others in ensuring true GHG emission reductions.”

Indeed, certain credits, especially those from natural sequestration projects (Nature-Based Solutions), have faced criticism for various reasons, some more justified than others.

 

The direct impact of carbon credits in combating climate change

Firstly, it can be challenging to maintain CO2 sequestration in these projects, as natural environments are subject to many risks, such as wildfires. When vegetation is burned, the stored CO2 is immediately released back into the atmosphere. To address this, some project developers apply risk probabilities to account for such uncertainties.

Secondly, carbon credits can be issued based on the number of GHG tonnes a project is expected to reduce. In other words, these carbon credits are estimated and sold before the reduction has actually occurred. This is known as ex-ante certification, which allows project developers to secure funding before and during the project’s development.

However, this certification method can cause issues when credits are purchased. If, after the purchase, an unfortunate event disrupts the project, this can result in the acquisition of carbon credits that do not represent a genuine GHG reduction. Although ex-ante certification is not exclusive to natural projects, it is more common for this type of project.

Nature takes many years to store the tonnes of carbon it has the potential to capture. In the case of tree planting, most trees take over 25 years to complete their growth and store carbon in their tissues. Additionally, land acquisition is often very expensive, which is why funding is needed from the project’s inception. Imagine having to wait more than 25 years before you can start paying off your debt!

 

Beware of overgeneralizing carbon credit types

If natural project carbon credits carry risks, does this mean that all carbon credits of this type are worthless? Absolutely not. It would be like saying all food is unhealthy just because candy exists. Ridiculous, right?

The Integrity Council for the Voluntary Carbon Market (ICVCM) also supports the development of GHG emission reduction projects and the achievement of global climate goals. Carbon credits are a vital tool in this effort.

Will Solutions is committed to taking concrete climate action. At Will, we specialize in climate projects based in Quebec and Ontario, ensuring our carbon credits are of the highest quality. What could be more secure and reliable than a carbon credit from a tonne of GHG already reduced? Explore our carbon credits from source reduction projects.

If you prefer to buy Nature-Based Solution (NBS) carbon credits, we recommend the carbon credits of our partner, Carbone Boréal. This Quebec-based science-driven project offers you access to local and verified carbon credits that protect the boreal forest, with well-identified stakeholders.