27. May 2024

The ABC of CO₂ certificates: an overview of important concepts and terms

The number of terms, buzzwords, regulations and paradigms in the field of sustainability is constantly increasing. This poses a considerable challenge for sustainability reporting and the development of climate strategies for companies. Below we highlight some of the key terms that have attracted a lot of attention over the past year and discuss the underlying debates.

Climate Project

Let's start with the centrepiece, the climate project. A climate project is the implementation of a project activity to reduce, avoid or remove CO₂ emissions. A CO₂ certificate is issued for every tonne of CO₂ that is saved, avoided or removed through a climate project. Climate projects follow a specific methodology that describes exactly how the project must be planned, implemented, monitored, externally validated and verified. The positive climate impact is calculated according to the methodology, with one CO₂ certificate corresponding to one tonne of CO₂ saved, reduced or removed. The methodology is defined and verified by an internationally recognised standard. Examples of this are the Gold Standard or the Verified Carbon Standard.

There are several basic criteria that every climate project must fulfil. One example of this is additionality. This requires that a climate project can only be realised thanks to the proceeds from the sale of CO₂ certificates. CO₂ certificates are therefore a financing instrument for the implementation of standardised climate projects that contribute to the reduction or removal of greenhouse gases. The buyers of CO₂ certificates can claim a climate contribution for themselves, as it is the sale of these certificates that makes the project and thus the positive climate impact possible. The advantage of CO₂ certificates is that they are an established and standardised instrument that enables many different stakeholders to support climate projects in an uncomplicated manner.

Avoidance

Climate projects that lead to a reduction or avoidance of emissions are called avoidance projects. Examples of project activities include forest protection or the feeding of feed additives that reduce methane emissions from dairy cows. Further examples can be found in our project portfolio or on request.

Removal

Climate projects that lead to the removal of CO₂ are known as removal projects. Examples of removal projects include the direct extraction of atmospheric CO₂ through filters and its subsequent geological storage or the pyrolysis of organic waste and the removal of the resulting biochar in agriculture.

CO₂ Offsetting

Let's move on to the concept of CO₂ offsetting: CO₂ offsetting refers to compensation measures that are taken to offset the CO₂ emissions caused by human activities. For example, some companies communicate that they have "offset" the annual CO₂ emissions of their operations. This is to say that they have co-financed climate projects that have led to a reduction or avoidance of emissions equivalent to their CO₂ emissions. In this way, CO₂ certificates enable companies and individuals to make an active and simple contribution to climate protection.

Compensation Claim vs. Contribution Claim

Organisations deal with the entitlement from purchased CO₂ certificates in different ways - which is the basis for controversial discussions. A distinction is made between the compensation claim and the contribution claim. The compensation claim is based on the assumption of CO₂ compensation. This involves the controversial assumption that one tonne of CO₂ emissions emitted is equivalent to one tonne of CO₂ emissions saved through a climate project. However, CO₂ offsetting does not mean that emissions no longer occur, but merely that the corresponding amount of greenhouse gases is reduced elsewhere. This is a key aspect, which some people claim is not communicated transparently. A common misconception is that the purchase of CO₂ certificates improves the greenhouse gas balance of a company or product, which is of course not the case.

The counterpart to the compensation claim is the contribution claim. The basic idea here is that the purchase of CO₂ certificates does not enable an equivalent compensation of CO₂ emissions, but rather represents a contribution to climate protection. Anyone who communicates that they have contributed to climate protection thanks to the purchase of CO₂ certificates means that the financial contribution has co-financed a climate project that has a positive impact on the climate.

CO₂ Neutrality

Over the past year, there has been a major break in the Swiss sustainability environment with the compensation claim behind CO₂ certificates, while the contribution claim has moved more into focus. This transition is not yet complete - but it is visible in the fact that numerous climate labels no longer speak of "compensation" or "CO₂ neutrality", which are based on the principle of the compensation claim. According to common understanding, the concept of CO₂ neutrality involves offsetting one's own emissions via CO₂ certificates. This is therefore based on the compensation claim mentioned above. Despite the controversy surrounding the concept of neutrality, there are also actors, such as individual companies or cantons, who adhere to the term CO₂ neutrality but adapt their understanding of it. In other words, some equate CO₂ neutrality with net zero.

Net Zero

Net zero is a central and undisputed climate concept that describes a status to strive for - the status of net zero emissions. Net zero presupposes that the company's own emissions must be greatly reduced. Net-zero roadmaps are often used in this context. According to the widely accepted Science Based Targets initiative (SBTi), net zero presupposes that a reduction of at least 90 % in own emissions has been achieved. The remaining unavoidable residual emissions must also be completely neutralised. This neutralisation is achieved by binding atmospheric CO₂ and storing it in the long term. This means that only CO₂ certificates from removal projects can be used for neutralisation. This removes emissions from the atmosphere and results in a net zero CO₂ balance.

Would you like to find out more about these topics? Do you have other terms that we should include? Or would you like to revise your strategy for climate contributions in line with the latest best practice? Don't hesitate to contact us - we will be happy to help you.

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