Classification of Emissions Reduction Credit

Additionality

Emissions reductions or removals are additional if the mitigation outcomes were only made possible by the carbon credit-generating activity. For example, emissions reductions or removals would be considered nonadditional if the mitigation outcomes underlying the carbon credits would have been achieved under enforced policy requirements or common practices.

Article 6

Article 6 of the Paris Agreement provides the overarching global framework for international cooperation through market-based and non-market-based measures for climate mitigation and adaptation.

Carbon crediting program

A scheme (voluntary or compliance-based) managed by a central organization that registers climate change mitigation activities and issues carbon credits for the ERs achieved by those activities.

Co-benefits

Non-carbon benefits arising from the mitigation activities which have positive social and environmental impacts.

Corresponding adjustment

An accounting method to be applied to ITMOs within the context of Article 6 of the Paris Agreement to avoid double counting. In practice, a country that authorizes the transfer of mitigation outcomes to a purchaser makes an addition to its account of emissions and the country acquiring and using the ITMOs toward its NDC makes a subtraction.

A corresponding adjustment is used to ensure that the host country does not use the volume of ERs (which forms the basis of the ITMOs being sold to a third party) for its own NDC achievement, which would constitute double counting.

As of the date of this report, host countries may decide whether and when to authorize ERs as ITMOs and apply an adjustment, including for voluntary markets.

Compliance-based carbon crediting program

Carbon credit programs established for compliance with laws or international agreements. These can be domestic, as is the case for compliance with regulatory carbon pricing instruments, or international, as is the case for compliance with NDCs or the Carbon Offsetting & Reduction Scheme for International Aviation (CORSIA).

Double counting

A situation where the same mitigation outcome is counted more than once toward a mitigation target (e.g., two countries using the same ITMOs toward their NDC achievement under the Paris Agreement).

Emissions reduction

GHG abatement resulting from activities that are carried out to reduce greenhouse gas emissions from sources.

Emissions removal

GHG abatement resulting from activities that remove greenhouse gases from the atmosphere and store it in geological, terrestrial, or ocean reservoirs, or in products.

ERC financing

Financial capital provided to ERC activities or to ERC project developers.

Internationally transferred mitigation outcomes (ITMOs)

Article 6.2 of the Paris Agreement allows for the authorization and transfer of ITMOs, i.e., real, verified, and additional emissions reductions and removals generated from 2021 onward and transferred between countries for use towards their NDC commitments and for other international mitigation purposes. This latter category encompasses both ‘international mitigation purposes’ (e.g., use towards an international compliance obligation such as CORSIA and “other purposes as determined by the first transferring participating Party” (also known as ‘other purposes,’ which some interpret as a reference to the voluntary carbon market or VCM).

Methodology

Technical blueprint for ERC activity design and the quantitative measurement of mitigation outcomes achieved.

Other international mitigation purposes

ITMOs can also be authorized and transferred for use towards ‘other international mitigation purposes,’ which encompasses both ‘international mitigation purposes’ (e.g., use towards an international compliance obligation such as the Carbon Offsetting and Reduction Scheme for International Aviation or CORSIA) and 'other purposes as determined by the first transferring participating Party' (also known as ‘other purposes,’ which some interpret as a reference to the voluntary carbon market or VCM).

Party

A country which is a signatory to an international agreement such as the UNFCCC or the Paris Agreement.