Carbon Emission Reduction Credits

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A carbon emission reduction credit (CER) represents a 1 metric ton reduction in CO2 equivalents emitted. The notion of equivalent emissions of CO2 is useful when quantifying emissions that relate to global warming because many different gases contribute to global warming, including methane, nitrous oxide, hydrofluorocarbons, and many others. The environmental impact of these gases can be converted to an equivalent CO2 basis (CO2e) using standard and generally agreed upon formulas. These credits are some times called simply carbon credits, carbon offsets, verified emission reductions (VERs), or certified emission reductions (CERs).[1]

Examples of Carbon Instruments

  • Carbon Credits from equipment upgrades

In this example, an older power plant is upgraded to a clean new one. The new plant produces fewer emissions for the same kWh generated, and the difference in emissions can be turned into emission reduction credits.

These carbon credits represent the amount of carbon stored in a tree, measured in metric tons. Carbon dioxide (CO2) is absorbed (sequestered) by the tree from the air during photosynthesis. The carbon, or C part, is used by the tree as a building block in it's cellular structure. The oxygen, or O2 part, is respired as a waste product.

  • Carbon Credits from clean energy

Let's say an individual has a solar electric panel on his roof or a wind turbine on his property. The energy produced by this equipment is energy that didn’t have to come from the local utility. Say that burning coal generates 70 percent of the electricity produced by that utility. This equipment "saved" that amount of coal from entering the atmosphere. [2]


  1. Environmental Commodities. APZ.
  2. Carbon Credit Trading. ICBE.