Carbon credits attach a revenue stream to emissions that were avoided rather than to a product that was sold. That inversion is the source of both their usefulness and every serious criticism made of them.
What a credit is#
One credit represents one tonne of carbon dioxide equivalent that was either kept out of the atmosphere or removed from it. It is issued by a registry against a methodology, verified by a third party, and retired when someone claims it against their own emissions.
Two markets exist. Compliance markets are created by law: regulated entities must surrender credits against their emissions. Voluntary markets serve buyers making commitments no law requires. Most African energy projects sell into the voluntary market, where prices are lower and demand is less predictable.
The counterfactual is the whole product#
A credit is a claim about a world that did not happen. Its integrity therefore rests on two estimates.
The baseline is what emissions would have been without the project. For a clean cookstove programme, that means assuming how much wood or charcoal the household would otherwise have burned, and how efficiently. Small changes in that assumption change the credit volume substantially.
Additionality asks whether the project would have gone ahead anyway. A grid-connected solar plant that is already the cheapest option available struggles to argue it needed credit revenue to exist. A cookstove distribution programme in a low-income market has a stronger case.
Why cooking projects dominate the African pipeline#
Clean cooking generates credits at scale for a structural reason: the counterfactual fuel is biomass, the emissions factor is high, and the number of households is very large. A programme distributing efficient stoves or LPG can generate substantial volumes.
It is also the category attracting the most scrutiny, for the same reason. Usage is hard to verify — a household may keep using the old stove alongside the new one — and fuel savings are estimated rather than metered. Methodologies have tightened repeatedly in response.
Practical considerations for a project#
| Question | Why it matters |
|---|---|
| Which registry and methodology? | Determines buyer acceptance and price |
| Who owns the credits? | Often disputed between developer, financier and host country |
| What is the monitoring burden? | Ongoing cost, sometimes larger than expected |
| Does the host country authorise transfer? | Required under Article 6 arrangements |
| What share reaches the community? | Increasingly a condition of sale |
The last two have become central. Host governments now assert rights over credits generated on their territory, partly because credits exported abroad may no longer count toward the country's own targets. Projects structured without addressing this have run into problems late.
Treat credit revenue as an improvement to a project that already works. A project that only works because of credits is one methodology revision away from not working.
Where this is heading#
The direction of travel is toward fewer, better-verified credits at higher prices rather than large volumes at low prices. For project developers that means higher monitoring costs and more defensible baselines, and it means the credits that survive scrutiny should be worth more.
Sources and further reading
