How a Nation Earns Carbon Credits?

Carbon Credits or Certified Emission Reduction units (CER’s) from Clean Development Mechanism (CDM) projects constitute a major portion of the emissions trade.

Around 3 Billion CER’s from the CDM projects are expected to be created by 2012. This is an equivalent reduction of 3 Billion Tons of CO2 from current global CO2 values.

Basically CDM projects are divided into three categories.

  1. Large scale projects.
  2. Forestation and reforestation projects.
  3. Small scale CDM projects.
    • Projects with less than 15 MW Electrical output or projects with less than 15000 Tons of CO2 emission reductions belong to this category.

UNFCCC’s agencies have established methodology, tools and procedures for approving, monitoring and calculating the CER’s for various types of CDM projects.

Details on CDM methodologies and tools can be found at

Apart from the very many administrative requirements for CDM projects, there are three basic technical requirements to qualify as a CDM project that can earn CER’s.

1. Additionality

This is the main requirement. The project should demonstrate that it will produce additional reduction in GHG’s than the project implemented without being a CDM project.

This is done by asking the following questions.

  • If implementing a lesser technology alternative, would it have led to higher emissions.( Barrier Analysis)
  • If implementing a financially more viable alternative, would it have led to higher emissions.( Investment Analysis)
  • If implementing the projects using prevailing common practices or regulatory requirements, would it have led to a project with higher emissions. (Common Practice Analysis)

The answers should be yes. Which means implementing the CDM project will have at additional reduction in emissions.

2. CO2 Leakages.

Leakages are GHG emissions that are not direct, but are associated with the implementation of the project. This is accounting the emissions or GHG absorption or reductions due to auxiliary or supporting project activities.

E.g.: Take the case of a CDM project for biomass utilization.

Where does the biomass come from? Is it from cutting trees If so, CO2 emissions could increase because of

  • land clearance and deforestation.
  • denying the source of forest products to other projects and activities.
  • the displacement of people and their livelihood.

These are called CO2 leakages, and all these have to be accounted for when considering the feasibility of a CDM project.

3. Baseline Measurements

Quantifying the emissions savings will require a baseline scenario.Out of the many alternatives, identify a baseline scenario where CDM project is not implemented. The baseline scenario should be viable project that meets all statutory and regulatory requirements. Baseline scenario can also be a project that gives a similar output in near identical situations.

Compare the emissions from the baseline and the CDM project. This gives the CO2 reductions from the CDM project.

E.g. Consider a CDM project that the uses landfill gas for power generation in a nearby industry.The baseline scenario will be

  • the landfill gas is vented or flared.
  • the industry sources the electricity from the power grid.

The emissions of GHG if we use the landfill gas for power generation and supply to the industry is compared with the baseline scenario to determine whether CDM is feasible or not. Also this is used to account for the CER’s generated.

CDM projects

Some of the projects that are being currently implemented are:

  • renewable energy projects using hydro and wind power
  • renewable energy using solar
  • use of biomass fuels
  • use of landfill gas
  • fuel switching from fossil fuels to others
  • generate own electricity energy efficiency procedures in burning fossil fuels. utilization of waste. avoidance of methane productions and discharge to atmosphere.

Detailed data can be obtained at “UNEP Risoe CDM/JI Pipeline Analysis and Database, March 1st 2009” at

This post is part of the series: Carbon Dioxide, Carbon Credits and Carbon Capture Systems.

Reducing CO2 emissions from Power Plants is the need of the day to reduce global warming and climate change. How to reduce CO2 emissions ? How to Capture CO2 ? and How Carbon Credits help reduce CO2 increase ? These are the topics discussed in this article series.
  1. Carbon Dioxide – The Green House Gas from Power Plants
  2. What are Carbon Credits ?
  3. How to Earn Carbon Credits
  4. How to Reduce Carbon Dioxide Emissions from Power Plants