How Are Credits Generated & Verified?

Generation

Project Developers

The generators of carbon credits are called project developers, or projects. Projects can take a wide range of approaches when looking to remove or reduce CO2e (see Methodologies), but all projects must adhere to a similar process when looking to generate carbon credits.

Each credit must undergo the measurement, reporting, and verification (MRV) process before being authorized for sale. MRV is conducted by environmental accountants to ensure that the credits are actually producing the CO2e reduction they claim to be.

Additionally, the credit generation must account for factors beyond simply measuring the CO2e reductions, such as additionality, permanence, and leakage.

Additionality

Additionality represents the extra environmental benefits of generating a carbon offset.

For example, a mangrove tree protection project in South Florida may generate offsets from the carbon reduction provided by the trees but only qualify for additionality for positively affecting the ecosystem’s biodiversity.

These certifications add value to a carbon offset because of the additional benefit created for the environment.

Permanence

Permanence refers to the length of time a credit represents a reduction in CO2e.

Permanence is essential because some popular credits, like forestry projects, aren’t permanent. Trees take many years to grow and mature, and they can be harvested or die before they ever reach their full carbon-sequestering potential.

When that happens, the reductions they represented disappear, which must be reflected in the price of the credit.

Leakage

Leakage refers to the unintended consequences of a carbon offset project.

For example, a landfill gas capture project may increase methane emissions if the gas is not fully captured. Emphasis is placed on planning and creating proper foundations because an improperly designed project can cause more harm than good.

Verification

Two key components of the carbon markets need verification procedures to ensure that they are actually achieving the climate action described above: the credits themselves, and the markets they trade in.

Credit Verification

The actual offsets are verified through a process called measurement, reporting, and verification (MRV). MRV encompasses the entire life cycle of an offset, from the initial generation through the sale for the entire life cycle of the project.

MRV is conducted in a variety of ways depending on the project. Some examples are environmental engineering firms that measure the impact of a conservation scheme, or satellite data that measures the impact of reforestation.

Generically, the firms that carry out MRV are referred to as VVBs (validation & verification bodies).

Market Verification

In addition to the offsets themselves, the secondary offset markets need to be regulated in order to ensure legitimacy. The main regulators in the offset markets are called “registries”.

Registries act as environmental accountants. Assisted by the VVBs, their main priority is to ensure that every tonne of CO2 reduced or removed from the atmosphere equals one carbon offset issued. This process builds authenticity in the market and limits double-counting, a process where the same offset is sold twice.

Registries also ensure that each offset produced meets the constantly updating quality standards.

Registries

The registries that govern the carbon markets come in two main types: institutional and independent.

Institutional

Institutional registries are large nonprofit organizations that take on the enormous task of MRV and market verification for large swaths of the carbon markets. Examples of institutional registries are Gold Standard and Verra. While generally seen as reliable, the sheer volume of work institutional registries take on leads to some gaps in accurate reporting, leaving a market niche for independent registries.

Independent

Unlike institutional registries, independent registries only take on a small number of projects to verify. These can be projects the registry is involved in the creation of or a small number of outside projects that the registry knows they can successfully verify. An example of independent registries is our partner Regen Network. Independent registries do much less for the carbon markets as a whole compared to institutional registries, but credits on independent registries are often seen as higher-quality since the verification process is more focused.