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  • Writer's pictureChristopher Whitt

How Solar Projects Can Earn Carbon Credits?

Solar energy isn’t just a great way to save on electricity bills. There are opportunities for everyone to generate carbon offsets (aka carbon credits) when installing solar systems, and it’s simpler than you may think.

Offsets v. Credits

A carbon offset is different from a carbon credit. A carbon offset represents one metric ton of carbon dioxide or equivalent greenhouse gases that has been avoided or permanently removed from the atmosphere. For example, wind and solar projects can create carbon offsets because the energy produced by these renewable energy projects reduces the amount of energy that must be procured from other projects using fossil fuels. Carbon offsets can also be created by planting and preserving forests that absorb carbon dioxide. There are also various experimental offsets being researched, including enzymes that capture carbon and other processes that capture CO2 in the ocean and turn it into a usable product.

Carbon offsets are traded in voluntary markets, meaning no one is compelled to buy them. The demand for them comes from companies that have set voluntary emissions reductions targets that can be met either by reducing their own emissions directly or effectively by paying someone else to do something that reduces emissions.

In contrast, a carbon credit is a tradeable permit, or right, that allows the holder to emit one metric ton of carbon dioxide or greenhouse gas into the atmosphere. Carbon credits are a creature of government regulations that limit the amount of CO2 or greenhouse gas that can be emitted. When a company subject to such regulation finishes below its required emissions cap, the company earns a carbon credit for every metric ton it is under its cap. It can then sell its carbon credits to other regulated companies that can use the purchased carbon credits to reduce the amount of CO2 or greenhouse gas that they are deemed to emit.

Carbon credits are traded in compliance markets. Trading is limited to the entities and regions covered by the compliance market. Europe is in the forefront of the compliance market with the EU actively managing prices at which credits trade. In the United States, the only large compliance carbon offset program is in California, where the California Air Resources Board oversees trading in "ARB offset credits" which are issued by the Air Resources Board to projects that meet specific requirements.

Companies trade carbon credits because they have to, and they trade carbon offsets because they want to. The more valuable carbon offsets are those issued by programs with more rigorous rules and standards for offsets.

There are several voluntary carbon offset programs that register projects in the United States, including the American Carbon Registry, the Verified Carbon Standard and the Climate Action Reserve. Once projects are certified and registered by such a program, then the registrant can sell the offsets on the open market. Each program has its own criteria and a dizzying number of acronyms.

The American Carbon Registry standard v7.0 sets out the eligibility criteria for registration of project-based carbon offsets. Following its requirements, according to the American Carbon Registry, will "ensure that project-based offsets represent emissions reductions and removals that are real, additional, permanent, net of leakage, accurately and conservatively quantified, verified by a competent independent third party, and used only once."

Projects verified by the American Carbon Registry are issued verified emissions reductions (VERs).

Projects verified by the Climate Action Reserve end up with registered offsets called Climate Reserve tons (CRTs). CRTs can be converted into verified carbon units (VCUs) and transferred to a VCU registry with Verra.

The carbon offsets created under these programs are traded on various platforms. Each platform is nothing more than a registry. The main voluntary carbon offset registries include the American Carbon Registry, APX Inc., Markit and Verra.

Trading on the American Carbon Registry and Verra is limited to offsets created under programs administered by those platforms while trading on Markit and APX is of multiple environmental-related credits. For example, APX partners with multiple carbon offset programs and administers registries for VCUs, CRTs and VERs.

More business owners than ever are turning to solar and natural gas turbines to generate these offsets to hedge themselves against credit requirements. Natural gas turbines are the best offset a commercial building can have in place. For a free feasibility report, contact the G3 team now.

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