Carbon credits work as certificates that represent one ton of greenhouse gases (GHG) that were not emitted into the atmosphere. The unit used for carbon credits is tonnes of carbon dioxide equivalent (tCO2e). Finally, they can be traded on the carbon credit market.

Greenhouse gases are responsible for maintaining life on the planet, as they prevent heat loss and keep the Earth warm. However, anthropogenic actions, that is, actions caused by human activity, have contributed to the increasing increase in these gases in the atmosphere, causing it to overheat and causing impacts such as the melting of polar ice caps, rising sea levels and desertification of arable areas.

The best-known GHGs are carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), sulfur hexafluoride (SF6), hydrofluorocarbons (HFCs) and perfluorocarbons (PFCs).

Did you know that carbon dioxide (CO2) is not the only greenhouse gas (GHG), although it is the most abundant in the atmosphere? Other gases emitted by human action (known as anthropogenic action), such as methane (CH4) and nitrous oxide (N2O), also contribute to global warming and are considered GHGs.

Each GHG has the intrinsic characteristic of being able to absorb more or less heat. To facilitate comparison between the different GHGs and their impact on climate change, the concept of Global Warming Potential (GWP) began to be used by the Intergovernmental Panel on Climate Change (IPCC). In other words, GWP is the heat absorbed by a given GHG in the atmosphere, represented as a multiple of the heat that would be absorbed by the same amount of CO2 over a period of time, usually 100 years. Therefore, the GWP of CO2 is equal to 1, while CH4 has a GWP of 28, for example.

The tonne of CO2 equivalent (tCO2e) has been adopted as the standard international measure for comparing the GWP of GHGs. It is calculated by multiplying the GWP of a GHG by its mass. For example, one tonne of CH4 is equivalent to 28 tonnes of CO2 in terms of heat absorption capacity. In other words, one tonne of CH4 is equivalent to 28 tCO2e.

The carbon credit market emerged from the Kyoto Protocol (1997), in which an environmental commitment was made between developed countries to reduce their greenhouse gas emissions. However, considering the difficulty of transitioning to a sustainable economy, a mechanism was created that attributes economic value to GHG emission reductions, with incentives from a financial perspective.

The carbon credit market initiative, therefore, was created to help developed countries meet the goals established by the Kyoto Protocol by purchasing credits from other countries or companies that manage to reduce their emissions beyond the goals. This market became known as the regulated carbon market. Years later, this initiative expanded and, in parallel, the voluntary carbon market emerged.

To help developed countries (known as Annex 1 countries) achieve their targets, as well as to encourage developing countries and the private sector to contribute to reducing GHG emissions, the Kyoto Protocol established three market mechanisms, constituting the so-called regulated carbon credit market: Joint Implementation (JI), Emissions Trade System (ETS) and the Clean Development Mechanism (CDM). In the context of developing countries, the most relevant of these mechanisms is the UNFCC CDM.

The CDM allows developing countries to carry out projects whose Certified Emission Reductions (CERs) can be traded with countries that have emissions reduction targets defined by the Kyoto Protocol.

The voluntary carbon credit market emerged alongside the regulated market as a result of the initiative of companies, NGOs, institutions, governments and citizens to contribute to the reduction of GHG emissions, either by developing projects or purchasing carbon credits.

In the case of the voluntary market, carbon credits are called Verified Emission Reductions (VER), can be generated anywhere in the world and are audited by an entity independent of the UNFCC system, such as Verra and Social Carbon.

AFOLU is the acronym for Agriculture, Forests and Other Land Use. It is one of the sectors defined by the IPCC for the development of projects with a positive climate impact. This sector encompasses agricultural activities that emit greenhouse gases, as well as emissions and removals of carbon dioxide (CO2) due to land use change. In Brazil, according to the Greenhouse Gas Emissions and Removals Estimation System (SEEG), 74% of GHG emissions in 2021 were related to this sector, mainly due to the advance of deforestation.

Given the weight of emissions from the AFOLU sector in Brazil, Apsis Carbon believes that prioritizing emissions reduction in this area is essential for Brazil to meet the target set in the Paris Agreement, which is to reduce 43% of its emissions by 2030. One of the projects we have designed offers an opportunity for the sector: the Juntos Pela Floresta (JPF) Program aims to redefine the socioeconomic development model of the Amazon using carbon credits generated from avoided deforestation, thus fostering the forest bioeconomy.

REDD is the acronym for Reducing Emissions from Deforestation and Forest Degradation. A REDD project, therefore, seeks to reduce greenhouse gas emissions, as well as ensure carbon storage in trees and soil through avoided forest degradation and deforestation. In addition, other benefits are generated, such as protection of watersheds, positive impacts on biodiversity and local communities, etc. REDD projects follow voluntary market methodologies and their credits tend to be more valuable. When they are able to prove additional benefits, they receive certificates (“seals”) that further value the credits, such as Verra’s CCB standard, for Climate, Community and Biodiversity.

The Greenhouse Gas Protocol (GHG) is the entity responsible for introducing global standardized structures for measuring Greenhouse Gases (GHGs), such as emission calculation tools, training, etc. The objective of the Protocol is to enable both the public and private sectors to understand, quantify, manage and seek to mitigate their GHG emissions.

The GHG Protocol has a program adapted to the Brazilian context, that is, it takes into account some particularities such as the Brazilian energy matrix, type of fuel used in fleets, among others, developed by GVces (Center for Sustainability Studies at Fundação Getúlio Vargas) in 2008. The Brazilian GHG Protocol Program is of fundamental importance for the corporate agenda to combat climate change and provides international quality instruments and standards for accounting for GHG emissions.

An emissions inventory is a mapping or list of the sources and quantity of GHG emissions from a company or other type of organization that seeks or is required to measure its impact. Emission sources correspond to the processes in the corporation’s production chain, including third parties, that produce Greenhouse Gases (GHGs). The inventory provided by the GHG Protocol tool divides emissions into three macro categories: Scopes 1, 2, and 3.

Scopes 1 and 2 are mandatory and Scope 3 is optional. However, it is recommended that organizations that have greater materiality within their scope of activity carry out a Scope 3 inventory.

Scope 1 GHG emissions are direct emissions, that is, GHG emissions for which the company is directly responsible. Example: if the company has a fleet of cars, the GHG emissions resulting from the burning of fuel from these cars fall into Scope 1 in the mobile combustion category. Another example is activities involving changes in land use.

Scope 2 emissions are emissions related to the purchase, generation and transmission of energy. Example: if the company consumes 100 kWh per month, the emissions related to this energy consumption must be accounted for in Scope 2.

Finally, Scope 3 emissions correspond to indirect emissions, made by third parties, which would not occur without the company’s activities. Example: air travel made by one company, but in the service of another. The airline emits GHGs. In this case, it is a service provider for the inventory organization. Therefore, this emission source falls within Scope 3.

The Greenhouse Gas (GHG) emissions inventory is a management tool that allows the inventorying organization to have clarity on the sources and quantities of emissions derived from its production processes and its production chain. It is the starting point for planning a strategy to mitigate the impact generated by emissions, as well as to identify opportunities for cost reduction, for example, with fuels, within a process of continuous improvement.

Apsis Carbon carries out the GHG emissions inventory following the parameters of the Brazilian GHG Protocol program. After quantification, a report is prepared with the total emissions separated into the scopes and categories defined by the methodology. In addition to using the report internally for management purposes, the inventorying organization can also publish it in the Program’s Public Registry, an opportunity for the organization to obtain Environmental Seals in accordance with its performance.

The Brazilian GHG Protocol Program has three seal categories for GHG emissions inventories reported in the Program’s Public Registry. The seal categories are: gold, silver and bronze.

Gold Seal: GHG inventories published with Scopes 1, 2 and 3 with all emission sources relevant to the organization, verified by the Verification Body accredited by INMETRO, receive this seal;

Silver Seal: GHG inventories published with Scopes 1 and 2 with the inclusion of all emission sources of these scopes relevant to the organization;

Bronze Seal: GHG inventories published with Scopes 1 and 2 without including all emission sources of these scopes relevant to the organization.