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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Green Initiatives

Ganga Power Ltd's board is told that its renewable project can generate carbon credits. A director asks which test shows a credit is genuine. The project would have been built anyway because it is the cheapest option and is legally mandated. Which credit quality principle is failing?

The failing principle is additionality. A credit is genuine only if the reduction would not have happened without carbon finance. A project that is legally required or already the cheapest option would have gone ahead anyway, so it adds no extra emission reduction.

  1. APermanence
  2. BAdditionalityCorrect
  3. CLeakage
  4. DDouble counting

Explanation

Additionality asks whether the emission reduction would not have occurred without the carbon credit revenue. A project that is mandated or financially viable anyway fails this test. Permanence concerns reversal risk, leakage concerns shifting emissions elsewhere, and double counting concerns claiming one credit twice.

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