emission reduction units

emission reduction units
Name	Emission reduction units
Type	Carbon credit

emission reduction units

Emission reduction units are tradable instruments representing quantified reductions in greenhouse gas emissions created under international mechanisms and domestic schemes. They function as units of compliance and voluntary mitigation tied to projects, protocols, registries, and verification systems. Developed alongside instruments such as Certified Emission Reduction and Assigned Amount Unit, they intersect with institutions like the United Nations Framework Convention on Climate Change, Intergovernmental Panel on Climate Change, World Bank, European Union Emissions Trading System, and International Organization for Standardization.

Overview

Emission reduction units serve as measurable proof that a specific activity reduced emissions relative to a baseline established by protocols, methodologies, or standards. Projects generating these units commonly involve stakeholders including United Nations, Multilateral Development Bank, World Bank Group, Asian Development Bank, African Development Bank, European Investment Bank, Gold Standard, Verified Carbon Standard, Climate Action Reserve, and national registries such as Registry of Kyoto Protocol-linked systems. The lifecycle of an emission reduction unit typically involves project design, validation by entities like Designated Operational Entity or Independent Entity, issuance by authorities such as the Executive Board of the Clean Development Mechanism or national authorities, and transfer via registries administered by organizations like UNFCCC Secretariat or regional registries.

Creation and issuance

Creation of an emission reduction unit begins with a project activity developed under an approved methodology from bodies such as the Clean Development Mechanism, Joint Implementation mechanisms, or voluntary standards like Gold Standard and Verified Carbon Standard. Project developers prepare documentation for validation by Designated Operational Entity or accredited Validation and Verification Body under standards recognized by the United Nations Framework Convention on Climate Change or national accrediting bodies like European Accreditation. After monitoring, verification, and certification, issuance is performed by authorities including the CDM Executive Board, national authorities under Joint Implementation, or registry operators linked to programs like the European Union Emissions Trading System and registries maintained by entities such as Markit, ICE, and national registries of countries like Japan, Canada, Australia, New Zealand, and United States programs.

Accounting and trading mechanisms

Accounting for emission reduction units relies on standardized measurement, reporting, and verification processes established by bodies such as the Intergovernmental Panel on Climate Change, International Organization for Standardization, and the UNFCCC guidance documents. Trading occurs on secondary markets, exchanges, and over-the-counter platforms operated by firms like Goldman Sachs, Morgan Stanley, BP, Shell, Vattenfall, and specialized brokers. Registry systems ensure unique serialisation and cancellation to avoid double counting; registry operators include the UNFCCC Secretariat, European Commission, and independent registries linked to standards like Verified Carbon Standard and Climate Action Reserve. Accounting interfaces with national inventory reporting under the Paris Agreement and mechanisms of the Kyoto Protocol including Assigned Amount Unit accounting and track-linking between registries overseen by entities such as International Emissions Trading Association.

Use in compliance and voluntary markets

Emission reduction units are used in compliance markets created by instruments and institutions such as the Kyoto Protocol, European Union Emissions Trading System, California Cap-and-Trade Program, Regional Greenhouse Gas Initiative, China national carbon market, and national schemes in New Zealand, Switzerland, and South Korea. They are also bought in voluntary markets facilitated by standards like Gold Standard, Verified Carbon Standard, American Carbon Registry, and intermediaries including MarkitSERV, AirCarbon Exchange, and Climate Trade. Buyers span corporations such as Microsoft, Amazon (company), Apple Inc., Swiss Re, Allianz, IKEA, Unilever, and financial institutions like BlackRock and World Bank Carbon Finance Unit pursuing claims of mitigation, offsetting, or compliance with regulatory obligations, corporate sustainability commitments, or renewable energy certifications from organizations like RE100.

Criticisms and controversies

Emission reduction units have attracted criticism from researchers, NGOs, and policymakers including participants like Greenpeace, World Wildlife Fund, Friends of the Earth, Oxfam, and scholars at institutions like Harvard University, University of Oxford, Stanford University, Massachusetts Institute of Technology, and London School of Economics. Concerns include additionality disputes examined in studies by Intergovernmental Panel on Climate Change authors, permanence risks highlighted by International Union for Conservation of Nature analyses, baselines and leakage problems studied in reports from Organisation for Economic Co-operation and Development, and governance flaws noted by the United Nations Environment Programme. High-profile controversies have involved project types like large hydroelectric projects, afforestation/reforestation schemes, and industrial gas destruction projects examined by European Commission inquiries and court cases in jurisdictions including Brazil, India, Indonesia, and Kenya. Allegations of double counting, fraud, and perverse incentives led to reforms influenced by actors such as Green Climate Fund, G7, G20, and negotiations at UNFCCC Conference of the Parties sessions.

Legal and regulatory framework --- International and national perspectives

International legal frameworks governing emission reduction units derive from instruments and institutions like the Kyoto Protocol, Paris Agreement, United Nations Framework Convention on Climate Change Secretariat, Ad Hoc Working Group on the Paris Agreement, and the Santiago Network. National regulation integrates laws, agencies, and markets in countries such as United States Environmental Protection Agency, European Commission, China Ministry of Ecology and Environment, Japan Ministry of the Environment, Australian Clean Energy Regulator, New Zealand Ministry for the Environment, and judiciary precedents from courts in European Court of Justice and national supreme courts. Bilateral and multilateral arrangements, administered by entities like World Bank carbon funds, International Civil Aviation Organization through mechanisms such as CORSIA, and regional agreements like the European Green Deal, shape eligibility, transfer, and use. Ongoing international negotiations, led by delegations from blocs including European Union, Alliance of Small Island States, Least Developed Countries Group, Umbrella Group, and African Group on Climate Change, continue to refine accounting, transparency, and registry interoperability.

Category:Carbon trading