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Carbon Credit Generation Process

The carbon credit generation process involves several steps to quantify, verify, and certify greenhouse gas emissions reductions or avoidance in a project, which can then be traded as carbon credits. This process is crucial for the integrity of carbon markets and ensures that buyers have confidence in the environmental benefits of purchasing these credits.

Project Development and Registration​

Projects aiming to generate carbon credits must first develop their project design document (PDD) outlining the methodology and expected emissions reductions or avoidance. The PDD must be submitted to a designated national authority (DNA) for registration, which involves reviewing the project's eligibility and conformity with applicable laws, regulations, and guidelines.

Project Validation​

After registration, the project is eligible for validation by an independent third-party validator. This step ensures that the project has indeed achieved the claimed emissions reductions or avoidance, typically through monitoring, reporting, and verification (MRV) activities. The validator issues a validation report confirming the project's compliance with specified standards.

Emission Reductions Quantification​

Following validation, the validated emission reductions are quantified by calculating the difference between the baseline scenario and the actual emissions from the project. This calculation is based on methodologies approved by international or national standards, such as those outlined in the Clean Development Mechanism (CDM) of the United Nations Framework Convention on Climate Change (UNFCCC).

Credit Issuance​

Once verified emission reductions have been quantified, the DNA issues carbon credits to the project. These credits represent one tonne of CO2 equivalent emissions reduction and can be traded on carbon markets.

Carbon Market Trading​

Carbon credits generated through this process can then be sold or traded to entities seeking to offset their greenhouse gas emissions. The purchase of carbon credits provides a financial incentive for businesses and individuals to invest in projects that reduce, remove, or avoid greenhouse gases from the atmosphere.