Concept of Carbon Credits
Carbon credit bonds are financial instruments that allow companies and countries to offset their CO₂ and other greenhouse gas (GHG) emissions. They function as tradable units that enable entities to compensate for their emissions by investing in projects that reduce, prevent, or absorb pollutant emissions.
Once generated and acquired, carbon credits act as an emission licence: for each credit a company or entity owns, it is entitled to emit one tonne of CO₂ (or its equivalent in another GHG) and be considered carbon neutral.
The Carbon Credit Market
The carbon credit market originated with the Kyoto Protocol, an international agreement signed in 1997 under the United Nations Framework Convention on Climate Change (UNFCCC), aimed at reducing six GHGs. Currently, no global system or unified regulatory framework governs carbon credits; they function across several independent markets.
Regulation of Carbon Credits in Spain
In Spain, the legal framework governing carbon credits includes:
- Law 2/2011, of March 4, on Sustainable Economy
- Royal Decree 1494/2011, of October 24, regulating the Carbon Fund for a Sustainable Economy
- Royal Decree 163/2014, of March 14, establishing the Carbon Footprint, Offsetting, and Carbon Absorption Projects Registry
The Carbon Footprint, Offsetting, and Carbon Absorption Projects Registry
The Carbon Footprint, Offsetting, and Carbon Absorption Projects Registry (the Registry) was established by RD 163/2014 as a public administrative registry under the Ministry of Agriculture, Food, and Environment via the Spanish Office for Climate Change.
It consists of three sections:
- Carbon footprint and GHG emission reduction commitments
- CO₂ absorption projects
- Carbon footprint offsetting
Projects that generate carbon credits must be registered here, as the Registry acts as a verifier of the project characteristics that justify the commercialisation of its relevant carbon credits.
Who Can Issue Carbon Credits in Spain?
Carbon credits can be issued and traded by individuals or legal entities that implement and own CO₂ absorption projects in Spanish territory and are registered in the Registry’s CO₂ absorption projects section.
Eligible projects must relate to land use, land-use change, and forestry (LULUCF) activities that enhance stored carbon.
Each registration must include:
- Project identification code
- Project owner details
- Project information: type, location, surface area, cadastral reference, and land registry data
- Estimated net CO₂ absorption for the project duration
- CO₂ absorption available for offsetting
The registration is valid for five years, and project owners must submit updated documentation afterwards or each time carbon credits are transferred for offsetting. Any changes—such as wildfires or high plant mortality—must be reported promptly.
Calculation of CO₂ Absorption
The calculation of CO₂ absorption is based on the IPCC guidelines and best practices used for Spain’s National Greenhouse Gas Inventory.
Only living biomass is considered a CO₂ sink—dead organic matter is excluded. The models use species- and region-specific growth data across Spain.
Conclusion
The trade of carbon credits in Spain is subject to verification by the Carbon Footprint, Offsetting, and Carbon Absorption Projects Registry. This validation ensures the authenticity of the CO₂ absorption data provided by each registered project and provides legal certainty to the market.
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