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  • Pedro Barros

Differentiation between Carbon Credits and Payments for Environmental Services (PES)

Dear readers,


Recently, the media has been discussing "Payments for Environmental Services (PES)" programs, and since then, we have noticed misconceptions between this practice and the internationally known concept of carbon credits. To clarify these concepts and explain how they differ, it is essential to understand what each represents and their importance in the context of sustainability and environmental regulation.


Payments for Environmental Services (PES)


PES are economic incentives offered to landowners or farmers who conserve ecosystem services, such as maintaining native forests, conserving biodiversity, and preserving water resources. These payments are voluntary and aim to encourage environmental conservation, as interpreted by the National Policy on Payments for Environmental Services (Law 14.119/21) and the Brazilian Forest Code (Law 12.651/12).


Carbon Credits


Carbon credits, on the other hand, are high-integrity financial assets resulting from a rigorous certification process. To be considered valid carbon credits, there must be:


- Application of a certification standard.

- Project development by qualified and independent entities.

- Audit by third-party companies.

- Certifying body for credit registration.

- Public registry of credits and transparency in the projects conducted.


The crucial difference between PES and carbon credits is the rigor and market recognition. Carbon credits are part of a market with prices determined by supply and demand. PES, while valuable for environmental conservation, do not have such a structured market and are alternative arrangements.


For instance, satellite measurements alone do not produce carbon credits but rather estimates of carbon sequestration that may underpin PES. To ensure integrity and avoid conflicts of interest, Lux Carbon Standard points out that independent parties must conduct the measurement, audit, certification, and marketing of carbon credits. When the same company performs satellite measurements and directly markets these "carbon bonuses" while also setting the prices, an evident conflict of interest arises.


Transparency and credibility are central to achieving market value. The registry of credits should be publicly accessible, as well as the projects conducted. A company buying carbon measurements is not technically offsetting its emissions but rather assisting owners in maintaining forest areas. While beneficial, it lacks a tangible market value or the potential for successful international trade.


Carbon offsetting occurs when a company or individual invests in activities that remove or reduce CO2 emissions to balance their own emissions. Carbon credits are the currency of this compensation. One credit equals the removal of one ton of CO2 from the atmosphere and can be purchased by entities wishing to offset their emissions.


Understanding the difference between PES and carbon credits is crucial. While both aim to promote sustainability and reduce greenhouse gas emissions, each operates within a specific context, with distinct levels of formalization and market recognition.


Lux Carbon Standard is committed to clarifying these concepts and ensuring that carbon credits achieve their vital role as high-integrity financial instruments, promoting transparency and effectiveness in the fight against climate change and positively impacting the Brazilian economy.

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