CCP CCP Carbon Markets & Offset Credits 1 — Questions and Answers
Question 1: What is a carbon credit, as traded in voluntary and compliance carbon markets?
- A certificate representing one metric ton of CO2 equivalent reduced or removed from the atmosphere (Correct answer)
- A government subsidy paid to renewable energy companies per megawatt-hour generated
- A financial instrument backed by physical coal reserves held in reserve
- A permit allowing a company to emit unlimited greenhouse gases in exchange for a fee
Correct answer: A certificate representing one metric ton of CO2 equivalent reduced or removed from the atmosphere
A carbon credit represents one metric ton of CO2 equivalent (CO2e) that has been reduced, avoided, or removed from the atmosphere, and can be bought and sold in carbon markets.
Question 2: Under the U.S. Regional Greenhouse Gas Initiative (RGGI), which sector is primarily regulated?
- Electric power generation (Correct answer)
- Agriculture and livestock
- Commercial transportation
- Residential heating
Correct answer: Electric power generation
RGGI is a cap-and-trade program covering CO2 emissions from fossil fuel–fired electric power plants with a capacity of 25 MW or more across participating northeastern states.
Question 3: What distinguishes a 'compliance' carbon market from a 'voluntary' carbon market?
- Compliance markets are legally mandated by regulation, while voluntary markets allow companies to purchase offsets by choice (Correct answer)
- Voluntary markets are government-run while compliance markets are industry self-regulated
- Compliance markets only trade renewable energy certificates, not carbon offsets
- Voluntary markets require third-party verification while compliance markets do not
Correct answer: Compliance markets are legally mandated by regulation, while voluntary markets allow companies to purchase offsets by choice
Compliance carbon markets are established by law or regulation (such as cap-and-trade programs), obligating covered entities to participate, whereas voluntary markets are used by organizations choosing to offset emissions beyond legal requirements.
Question 4: Which international framework governs the trading of carbon credits between countries under the Paris Agreement?
- Article 6 of the Paris Agreement (Correct answer)
- The Kyoto Protocol's Clean Development Mechanism
- The Montreal Protocol's financial mechanism
- UNFCCC Annex II funding rules
Correct answer: Article 6 of the Paris Agreement
Article 6 of the Paris Agreement establishes the rules for international carbon market cooperation, including bilateral trading (Article 6.2) and the new centralized crediting mechanism (Article 6.4).
Question 5: What is 'additionality' as it applies to carbon offset projects?
- The requirement that emission reductions would not have occurred without the carbon finance incentive (Correct answer)
- The process of adding new verified credits to an existing registry account
- A scoring system for measuring the biodiversity co-benefits of a forestry project
- The minimum quantity of credits a project must generate to be listed on an exchange
Correct answer: The requirement that emission reductions would not have occurred without the carbon finance incentive
Additionality requires that greenhouse gas reductions attributable to an offset project would not have happened under a 'business as usual' scenario without the revenue from carbon credit sales.
Question 6: Which voluntary carbon market standard is most widely used globally for certifying nature-based offset projects such as REDD+?
- Verified Carbon Standard (Verra VCS) (Correct answer)
- Gold Standard
- American Carbon Registry
- Climate Action Reserve
Correct answer: Verified Carbon Standard (Verra VCS)
Verra's Verified Carbon Standard (VCS) is the world's most widely used voluntary GHG program, certifying millions of tonnes of credits including REDD+ (Reducing Emissions from Deforestation and Forest Degradation) projects.
CCP CCP Carbon Markets & Offset Credits 1
What is a carbon credit, as traded in voluntary and compliance carbon markets?