Certified emissions reduction (CER)

Definition

A certified emissions reduction (CER), also called a carbon credit, is a unit of greenhouse gas (GHG) emissions reduced by sources or removed by sinks, and achieved under a clean development mechanism (CDM) project. Under the CDM, developed countries could invest in or finance projects in developing nations that would result in a reduction in emissions or the removal of GHGs from the atmosphere, in addition to any reductions that would have occurred in the absence of the projects. The difference between the emissions that would have been released without the project (referred to as the baseline emissions) and what was actually released was validated and certified by an independent body, and confirmation was issued by the CDM Executive Boards as a CER. Developed countries that quantified emission limitation and reduction commitments (QELRCs) under the Kyoto Protocol could use CERs to help meet their targets. These QELRCs were outlined in Annex B of the protocol, and developed countries could use CERs to achieve part, but not all, of their commitments. While CER credits gained popularity under the Kyoto Protocol, independent bodies and governments worldwide continued using this framework or a close adaptation of it decades later to manage emissions, particularly from the most heavily polluting industries.

A CER represents 1 metric ton of carbon dioxide equivalent (CO₂e) GHG emissions, either removed from the atmosphere or prevented from being released into the atmosphere. The amount of CERs issued for 1 metric ton of GHG reduction or removal depends on the type of gas and its global warming potential (GWP). The GWP of a gas refers to an estimation of its contribution to climate change or the effect it has on the climate. All gases are defined relative to carbon dioxide (CO₂), whose GWP is 1, so for 1 metric ton of CO₂ reduced or removed, one CER or carbon credit can be issued. The GWP of other gases may vary depending on the time horizon over which the impact of the gas is being determined—for most gases, the impact reduces as the time horizon increases. The GWP of methane, for example, ranges from 56 for a time horizon of 20 years, to 21 for 100 years, to 6.5 for 500 years. This means that for 1 metric ton of methane reduced or removed from the atmosphere, 56, 21, or 6.5 CERs can be generated, depending on the relevant time horizon.

Significance for Climate Change

By October 2008, about 227 million metric tons of CERs were being generated annually from registered CDM projects. The total CERs from all roughly 1,184 registered CDM projects amounted to about 1.2 billion metric tons by the end of 2012. The purpose of the CDM includes assisting developing countries in their efforts to stabilize GHG levels in the atmosphere at a safe level and assisting developed countries in meeting their commitments to reduce GHG emissions. The aim of the CDM, therefore, is to support the mitigation of climate change.

The quantity of CERs generated from CDM projects represents how successful the CDM has been in achieving this goal. In particular, the CER system is the only streamlined mechanism for developing countries to participate in the CDM, because under the Kyoto Protocol, they had no set emission-reduction targets. Since CERs are generated from projects implemented in developing countries, they represent emission reductions achieved in developing countries, in addition to those achieved in developed countries. In addition, the CDM framework assists developing countries in achieving sustainable development, helping them move to a more climate-friendly development path.

CERs could also be traded on the carbon market, allowing entities to invest in CDM projects to use the CERs generated to meet their reduction targets. Other entities invest in projects to obtain CERs and sell them on the carbon market. Trade in CERs helped create a market for trade in carbon, thereby increasing the number of entities, especially private entities, interested in carbon credits, and potentially in efforts to reduce GHG emissions.

The issuance of CERs could also negatively impact climate change. Developed countries with reduction targets can use CERs to meet these targets. If the emission reductions generated by a CDM project are overestimated and too many CERs are issued for the project, this would result in no decrease, or even a net increase, in GHG emissions, as these CERs would count toward developed country targets, and these countries could, in fact, theoretically increase their emissions by this amount.

While this system was initially successful, many experts considered it a failure by the mid-to-early-2010s. In an event now known as the "carbon panic of 2012," the credit price fell from €25 per metric ton of CO₂ to just €0.50. Following this dramatic pricing collapse, the system was slated for complete liquidation. However, in 2020, the United States and numerous developing countries worked to rescue the CER program. They collectively agreed to allow the use of CER credits under their domestic environmental tax systems and credit trading systems. This directly led to a reinflation of credit prices and the program's international revival, providing nations with additional incentives to reduce their carbon output.

Bibliography

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"The Clean Development Mechanism." The United Nations Climate Change, unfccc.int/process-and-meetings/the-kyoto-protocol/mechanisms-under-the-kyoto-protocol/the-clean-development-mechanism. Accessed 5 Dec. 2025.

"International Units: Certified Emissions Reduction (CER)." Clean Energy Regulator, Australian Government, 10 Nov. 2025, cer.gov.au/markets/international-units#certified-emission-reduction-units-(cers). Accessed 5 Dec. 2025.

Kainou, Kazunari. "Collapse of the Clean Development Mechanism under the Kyoto Protocol and Its Spillover: Consequences of 'Carbon Panic.'" CEPR, 16 Mar. 2022, cepr.org/voxeu/columns/collapse-clean-development-mechanism-scheme-under-kyoto-protocol-and-its-spillover. Accessed 5 Dec. 2025.

Wu, Johnny. "Navigating the World of Carbon Credits: A Complete Guide for Businesses." Cedars, 5 Mar. 2024, www.cedars-digital.com/navigating-the-world-of-carbon-credits-a-complete-guide-for-businesses. Accessed 5 Dec. 2025.

Yamin, Farhana, editor. Climate Change and Carbon Markets: A Handbook of Emissions Reduction Mechanisms. Earthscan, 2005.