FAQ’s

WHAT IS A CARBON CREDIT?

A carbon credit is a unit of exchange that can be used to offset greenhouse gas emissions.

One carbon credit is equivalent to one metric ton of greenhouse gases removed from the atmosphere.

A carbon credit and a carbon offset are synonymous terminologies.

WHO IS SELLING AND BUYING CARBON CREDITS?

There are two types of carbon markets, the large worldwide compliance market and the voluntary market.

COMPLIANCE MARKET: Under a GHG compliance program, companies that are large emitters are subject to government policy (and must pay carbon taxes), which often allow the use of carbon offsets for a portion of a commitment to reducing GHG emissions.

VOLUNTARY MARKET: The voluntary market operates outside (and also alongside) the compliance market and enables companies and individuals to purchase carbon credits on a voluntary basis to satisfy personal or corporate social responsibility objectives. If the credit purchase is for voluntary purposes, there are no special rules relating to international transactions beyond those which would apply for any other international transaction.

WHAT STANDARDS ARE USED TO VERIFY CREDITS?

We validate and verify your project's carbon credits through the British Standards Institution (BSI) to get the highest level of verification (ISO 14064).

WHAT CARBON METHODOLOGY DO YOU SUBSCRIBE TO?

We are methodolgy agnostic and are able to assign any approved carbon methodology to your project at any stage.

WHO VERIFIES AND VALIDATES CARBON CREDITS?

Validation/verification bodies (VVBs) assess projects against ISO 14064.


Our VVBs are qualified, independent third parties that verify and validate carbon projects and the credits that will ultimately be issued. This independent assessment process ensures the integrity of the carbon projects registered with the SACXR.


Only approved VVBs that have been accredited for ISO 14065  and who is an accredited member of the International Accreditation Forum can verify and/or approve the carbon credits that will be issued from a SACxR carbon project.


To become an approved VVB with SACxR, CONTACT US.

HOW DOES ONE CALCULATE CARBON CREDITS?

Step 1: Identify Polluting Activities

The polluting activities that would fall under Scope 1 emissions due to electricity use are considered for the family in California.

Step 2: Calculate Quantity of Resource Use

The average electricity use by a person in the US is 4517 kWh per year (kilowatts per hour) according to Shrinkyourfootprint.com. So a household of two uses around 10,000 kWh or 10 MWh of electricity (One Megawatt or MWh = 1000 kWh).

Next, calculate the emissions for the activity by using emission factors (EFs).

Step 3a: Calculate Emissions From Six Pollutants

From the EPA Greenhouse Emission Inventories (pg. 3), read the EFs for electricity purchased from CAMX, California which are:

  • 650.31 lbs of CO2/MWh

  • 0.03112 lbs of CH4/MWh

  • 0.00567 lbs of N2O/MWh

So using the three emission factors above, and multiplying by 10 MWh of electricity, calculate all GHG emissions for a year, with the formula:

Activity data x Emission factor = GHG emission

  • 10 x 650.31 lbs of CO2/MWh = 6503.1 lbs of CO2

  • 10 x 0.03112 lbs of CH4/MWh = 0.3112 lbs of CH4

  • 10 x 0.00567 lbs of N2O/MWh = 0.0567 lbs of N2O

Step 3b: Convert to Carbon Dioxide Equivalent (CO2e)

To express all the GHGs in terms of carbon dioxide equivalent (CO2e), multiply the global warming potential (GWP) supplied by EPA Greenhouse Emission Inventories for methane and nitrous oxide (pg. 1). Nitrous oxides GWP is 298, and methane's GWP is 25. GWP is one for CO2, as explained by EPA (Understanding Global Warming Potential).

  • 0.3112 lbs of CH4 x 25 = 7.78 lbs of CO2e

  • 0.0567 lbs of N2O x 298 = 16.896 lbs of CO2e

  • 6503.1 lbs of CO2 x 1 = 6503.1 lbs of CO2e

 Step 3c: Total Emissions

Finally, add the three CO2e from step (3b), 7.78 + 16.896 + 6503, to get 6527.77 lbs of CO2e.

So the total carbon dioxide equivalent emitted in a year is 6527.77 lbs of CO2e for electricity use by two people. In terms of tonnes that is 3.263 tonnes of CO2e (tCO2e).


WHAT IS THE KEY DETERMINANT OF CARBON CREDIT PRICING?

26 Countries worldwide have adopted legislation that introduces a compulsory carbon tax rate per ton of CO2e emitted that exceeds the GHG cap ("the CAP"). Many more countries are following suit as they commit to the reduction of Greenhouse Gases ("GHG") by 2 degrees by 2030 and net zero by 2050. 

Each year the CAP is lowered by the regulators (the CAP is something each country sets) resulting in more businesses being required to pay carbon tax over time. In addition to the CAP, the carbon tax rate also increases over time (the carbon tax rate is something each country sets).

More carbon tax will become payable over time, whether directly or indirectly. Directly would include those businesses that are GHG emitters exceeding the CAP.  Indirectly, would include businesses who export goods produced using carbon. Europe is in the process of drafting legislation, which will tax imports for products which cannot prove carbon neutrality. By 2023, exporters will be required to report the GHG emissions embedded in the goods they export, though the tax on those emissions will not be imposed on exporters until 2026.

The ultimate end buyer of a carbon credit (this is when a carbon credit is retired) will be a carbon taxpayer seeking to reduce the amount of carbon tax they would be required to pay. One way to pay less tax or achieve carbon neutrality is to buy carbon credits and use these as offsets.

The carbon tax rate (payable per ton of CO2e emitted) is the primary component of determining the price of a carbon credit. Timing (of the tax year in which the carbon tax rate applies and the Impact can also play a role in the price (the level of discount the taxpayer will pay): 

Businesses with low GHG emissions (i.e. below the CAP or neutral GHG emitters can create and sell carbon credits to larger GHG emitters or exporters in order to offset the carbon taxes they would need to pay.

According to the World Bank, the carbon tax rates across 26 countries are presented in the table below:

COUNTRY USD
Poland  $             0.08
Ukraine  $             1.03
Japan  $             2.36
Singapore  $             3.69
Mexico  $             3.72
Argentina  $             4.99
Chile  $             5.00
Colombia  $             5.01
South Africa  $             9.84
Latvia  $           16.58
Spain  $           16.58
Slovenia  $           19.12
UK  $           23.65
Portugal  $           26.44
Denmark  $           26.62
Iceland  $           34.25
Canada  $           39.96
Luxembourg  $           43.35
Ireland  $           45.31
Netherlands  $           46.14
France  $           49.29
Finland  $           85.10
Norway  $           87.61
Liechtenstein  $         129.86
Switzerland  $         129.86
Sweden  $         129.89


If the price of a carbon credit exceeds, the carbon tax rate it is logical to assume that no market would exist for carbon credits. In the graph below, we illustrate the point using South Africa as a proxy.

A South African business creating carbon credits would like to sell these at a premium (to the carbon tax rate), where the tax rates applicable for the buyer (in another country - ideally Liechtenstein, Switzerland or Sweden) are higher than the South African carbon tax rate (i.e. Premium Buyers).

In the end, a carbon credit developed on the SACxR register is no different to any other carbon credit created. They are all carbon credits. We ensure the quality of a carbon credit created is the same, regardless of where it comes from.

Buyers (taxpayers) may place a sentimental value on the price per carbon credit (and so may be happy to sacrifice some discount) knowing the carbon credits they are buying made an impact on one or more of the 17 United Nations Sustainable Development Goals.

There is a risk of overpricing carbon credits due to trading carbon credits for profit.  A carbon credit is not a Bitcoin that can have an infinite price. Its price is ultimately capped by the carbon tax rate in a given year when a carbon taxpayer (i.e. the ultimate buyer of a carbon credit) submits their carbon tax return in order to reduce the tax they must pay to their local revenue office.

THE JARGON

Adaptation

Preparing for new environmental conditions.

Additionality

A project must demonstrate that more carbon than normal is retained.

Cap-and-Trade

A government-regulated carbon market that places a limit on GHG emissions.

Carbon credit

A standardized unit that equals one metric ton of CO2e from a carbon offset project.

Carbon cycle

The way carbon moves through the atmosphere, oceans and land.

Carbon dioxide (CO2)

The most important GHG. Industry, electricity, and transportation are major sources of this gas.

Carbon dioxide equivalent (CO2e)

Amount of any GHG with similar warming to an amount of CO2.

Carbon flux

The fluctuations of CO2 in the atmosphere, oceans, and land.

Carbon footprint

The total amount of GHGs caused by a person or organization.

Carbon Credit Methodologies (CCM)

is a framework document that defines the quantification and parameters that are required to generate carbon offsets throughout the life of a project:

Carbon market

A system to reduce GHGs by putting a price on carbon and trading carbon credits.

Carbon offset

Reducing sources of GHGs, or increasing storage of GHGs, to compensate for other GHG emissions.

Carbon registry

Independent authority that approves, lists, and tracks a carbon credit’s ownership.

Carbon sequestration

Storage of carbon for a long time.

Carbon sink

A source that removes CO2 from the atmosphere.

Carbon source

A source that places CO2 into the atmosphere.

Carbon tax

A fee for GHG emissions.

Carbon Trade Exchange

The Carbon Trade Exchange is the leading trading platform where voluntary carbon credits issued by our Carbon Register can be traded globally at the push of a button.

Climate change

Changes in weather trends over time.

CO2 emissions

Release of CO2 into the atmosphere.

Ecosystem services

Benefits from nature such as forest products, clean air and water, carbon storage and recreation opportunities.

Environmental, Social, and Corporate Governance (ESG)

Business and investment behaviours that promote environmental sustainability and social equity.

Greenhouse effect

The process warms the planet from the sun by trapping heat in the atmosphere.

Greenhouse gases (GHG)

Molecules in the atmosphere retain heat, resulting in the greenhouse effect.

IPP Refers to Independent power producers (IPPs) who are non-utility generators (NUGs) that are typically not owned by the national electricity company or public utility. IPPs generate electricity for sale to the national electricity network.

ITMO's

Article 6 of the Paris Agreement describes the use of Internationally Transferred Mitigation Outcomes (ITMOs).

An ITMO is a Carbon Credit (offset) produced by projects in a country that have registered the project in the country in which the project operates.

ITMO's can be used where a country (usually developed) can lower the cost of meeting its own NDC by supporting less costly emissions reductions in another country.

ITMO’s are designed to decentralise the global origination of projects and carbon credits to the benefit of the nation where the project resides, allowing that country to finance emissions projects. Regulated entities within the buyer country would purchase (and surrender &retire) qualified ITMO’s and register this with its government.

The so-called ‘seller’ nations are then able to finance domestic mitigation obligations (projects) beyond what can be achieved with their existing resources, with the proceeds achieved from the sale of emission credits. To register large projects with large annual issuances of ITMOs, an electronic registry is essential.

Leakage

A project must demonstrate that carbon is not being released somewhere else.

NDC

Stands for National Development Contributions, relevant to the design and use of carbon markets in the context of Article 6.2 in which countries communicate actions they will take to reduce their Greenhouse Gas emissions in order to reach the goals of the Paris Agreement. Countries also communicate in the NDCs actions they will take to build resilience to adapt to the impacts of rising temperatures. 

Mitigation

Reducing sources of greenhouse gases (GHG) or increasing storage of GHGs.

Paris Agreement

The Paris Agreement is a legally binding international treaty on climate change that seeks to limit global warming to well below 2 degrees, in order to halt the adverse impacts of global warming.

 

It was adopted by 196 Parties at COP 21 in Paris, on 12 December 2015 and entered into force on 4 November 2016.

Permanence

A project must demonstrate that carbon is retained for a long time.

©, SEED10X, INC., All rights reserved 2021-2022