Questions & Answers
Which are the recognised quality standards meant in the following sentence? ‘(a) the total amount of carbon credits outside the undertaking’s value chain in metric tonnes of CO2eq that are verified against recognised quality standards and cancelled in the reporting period.’ Are we here talking about: option (1) the voluntary standards for carbon offsetting schemes such as Gold Standard or VCR, option (2) Mandatory Clean Development Mechanisms or option (3) Voluntary Electricity Attributes Certificates?
- Carbon credits
- quality standards for carbon credits
Background
ESRS E1 paragraph 59 states: ‘The disclosure on carbon credits required by paragraph 56 (b) shall include, if applicable:
(a) the total amount of carbon credits outside the undertaking’s value chain in metric tonnes of CO2eq that are verified against recognised quality standards and cancelled in the reporting period; and …’
ESRS E1 paragraph AR 61 states: ‘Financing GHG emission reduction projects outside the undertaking’s value chain through purchasing carbon credits that fulfil high-quality standards can be a useful contribution towards mitigating climate change. This Standard requires the undertaking to disclose whether it uses carbon credits separately from the GHG emissions (paragraphs 56 (b) and 59) and GHG emission reduction targets (Disclosure Requirement E1-4). It also requires the undertaking to show the extent of use and which quality criteria it uses for those carbon credits.’
ESRS E1 paragraph AR 63 states: ‘When preparing the information on carbon credits required under paragraphs 56 (b) and 59, the undertaking shall:
(a) Consider recognised quality standards …’
Annex II List of Acronyms and Defined Terms defines ‘Recognised quality standard for carbon credits’: ‘Recognised quality standards for carbon credits are those that are verifiable by independent third parties, make requirements and project reports publicly available and at a minimum ensure additionality, permanence, avoidance of double counting and provide rules for calculation, monitoring, and verification of the project’s GHG emissions and removals.’
Annex II List of Acronyms and Defined Terms defines ‘carbon credits’: ‘A carbon credit is a convertible and transferable instrument representing GHG emissions that have been reduced, avoided or removed through projects that are verified according to recognised quality standards. Carbon credits can be issued from projects within (sometimes referred to as insets) or outside an undertaking’s value chain (sometimes referred to as offsets).’
Answer
As stated in ESRS E1 paragraph 63, the undertaking shall consider recognised quality standards when preparing information on carbon credits. There is currently no list of recognised quality standards for carbon credit recognised by the EU or recommended by EFRAG. The definition of recognised quality standard for carbon credit, detailed in the Annex II List of Acronyms and Defined Terms, enumerates a list of criteria that need to be met:
(a) must be verifiable by independent third parties; and
(b) make requirements and project reports publicly available and at a minimum ensure:
(i) additionality,
(ii) permanence,
(iii) avoidance of double counting and provide rules for calculation,
(iv) monitoring, and
(v) verification of the project’s GHG emissions and removals.
If those criteria are met, an undertaking can consider the carbon credit as a recognised quality standard for carbon credit.
Relations
Paragraph | Content |
|---|---|
When preparing the information on carbon credits required under paragraphs 56 (b) and 59, the undertaking shall: | |
Financing GHG emission reduction projects outside the undertaking’s value chain through purchasing carbon credits that fulfil high-quality standards can be a useful contribution towards mitigating climate change. This Standard requires the undertaking to disclose whether it uses carbon credits separately from the GHG emissions (paragraphs 56 (b) and 59) and GHG emission reduction targets (Disclosure Requirement E1-4). It also requires the undertaking to show the extent of use and which quality criteria it uses for those carbon credits. | |
The disclosure on carbon credits required by paragraph 56 (b) shall include, if applicable: | |
When preparing the information on carbon credits required under paragraphs 56 (b) and 59, the undertaking shall: | |
Financing GHG emission reduction projects outside the undertaking’s value chain through purchasing carbon credits that fulfil high-quality standards can be a useful contribution towards mitigating climate change. This Standard requires the undertaking to disclose whether it uses carbon credits separately from the GHG emissions (paragraphs 56 (b) and 59) and GHG emission reduction targets (Disclosure Requirement E1-4). It also requires the undertaking to show the extent of use and which quality criteria it uses for those carbon credits. | |
The disclosure on carbon credits required by paragraph 56 (b) shall include, if applicable: | |
The disclosure on carbon credits required by paragraph 56 (b) shall include, if applicable: | |
When preparing the information on carbon credits required under paragraphs 56 (b) and 59, the undertaking shall: | |
Financing GHG emission reduction projects outside the undertaking’s value chain through purchasing carbon credits that fulfil high-quality standards can be a useful contribution towards mitigating climate change. This Standard requires the undertaking to disclose whether it uses carbon credits separately from the GHG emissions (paragraphs 56 (b) and 59) and GHG emission reduction targets (Disclosure Requirement E1-4). It also requires the undertaking to show the extent of use and which quality criteria it uses for those carbon credits. |