Types of Carbon Credits
There are many types of credits within the carbon emissions market, we have covered the main types here. Importantly at Green Market Opportunities (GMO) we only deal in Voluntary Emission Reductions / VERs, Verified Emission Reductions. These voluntary carbon credits, a more commonly used term, come from Clean Development Mechanism projects that have been fully verified then validated, they are trackable, traceable and 100% transparent. These credits are Spot Trade credits, they are freely tradable and make a worth while consideration for a speculative part of ones portfolio over the medium term.
VER
Verified Emission Reductions are generated by projects that are then verified by a third party, but without the costs associated with CERs, which are a type of carbon credit subject to much more stringent regulation, pushing the price point higher. This means that individuals and companies can reduce their emissions in a more efficient and cost effective way. Despite there being less regulation, VERs are still subject to a extremely high standard, and emissions reductions must be real, measurable, permanent, additional to what is already being done, and independently verified.
Spot transactions are carried out for VERs, which have already been generated, and have completed or are in the process of verification by an independent third-party. Forward transactions are carried out for VERs with a generation schedule over several years, typically up until 2012. Green Market Opportunities does NOT trade forward contracts. Spot trade VERs trade over the counter (OTC) and on some exchanges such as the Chicago Climate Exchange (CCX), Carbon Trade Exchange. This is giving structure to this new and exciting market, and helping it grow.
We only source and trade in fully Verified Carbon Standard (VCS) and Gold Standard approved credits.
CER
Certified Emission Reductions (CERs) were created under the Kyoto Protocol's Clean Development Mechanism (CDM) to allow industrialised countries to invest in emission reducing projects in developing nations. The CDM projects generate CERs, credits that can then be used to offset emissions on the EU ETS. Once a CER has been issued it carries the same compliance value as an EUA.
CER credits are more highly regulated and must meet a number of criteria as defined by the CDM and the Kyoto Protocol, this makes the price point considerably higher. Like VERs, the emissions reductions must be real, measurable, permanent, additional to what is already being done, and independently verified.
EUA
EU Emission Allowances, or EUAs, are the credits that are allocated to the companies covered by the EU Emission Trading Scheme. Each one represents the right to emit one tonne of carbon dioxide. There are a fixed number of EUAs available to industries covered by the EU Emission Trading Scheme. EUAs are tradable. Carbon Retirement buys and retires EUAs.
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