Carbon Credit Additionality

Carbon Credit

In carbon trading, the concept of additionality is used to determine whether an emission reduction activity is actually “additional” – or would not have happened without the sale of carbon credits. This is a critical component of the verification process that all buyers must undergo to purchase carbon credits, as well as a key indicator of environmental quality.

To be considered additional, a project must reduce emissions above what is expected to happen under business as usual. Often, this is a difficult measure to assess because it requires extensive research into local circumstances and conditions that cannot be accurately predicted. This is why it’s important for companies buying carbon credits to ensure that they are only purchasing from projects that have been vetted against the best available science, using the methods laid out by the relevant carbon accounting standards and protocols.

The most carbon.credit common way to test for additionality is to look at the financial viability of a carbon credit project, and see how much revenue it generates from the sale of credits in comparison to other income streams. This is typically the most reliable indicator of whether a project has passed the additionality test, as it indicates that the sale of carbon credits is playing a vital role in allowing the project to take place.

Carbon Credit Additionality

However, it’s also important to look at the wider benefits of a carbon project, and to consider the likelihood that these would have happened even if the project wasn’t being implemented. For example, in woodland creation carbon projects, the wider benefits of creating a forest may be ‘bundled’ with each carbon unit when sold, meaning that the project passes the additionality test even if it is not financially viable solely through the sale of credits.

Carbon markets are currently structured in a manner that makes it very hard to determine additionality on a project-by-project basis. This is because the majority of projects are in emissions avoidance categories (where a carbon credit is created for switching to renewable energy, or reducing their electricity use), rather than removals (where a credit is created for removing greenhouse gases from the atmosphere). This means that most of the risk around a project’s additionality lies with the methodologies it uses, rather than the actual impact that is measured, and this poses significant risks to buyers.

Ultimately, if carbon markets are serious about delivering real change in the world, they need to restructure the way that they operate. They need to move away from funding small, individual projects, and toward paying entire companies to change their behavior. This would make it far easier to test for additionality, as it would be more straightforward to determine what a company would have done in the absence of carbon markets.

With carbon credits being the most common tool for businesses to reduce their emissions, it’s critical that they are only purchased from projects that have been deemed to be additional, and this is why the Sylvera frameworks are so carefully designed; each scoring pillar, including additionality, is designed to tease out specific nuances and highlight risks in individual projects.