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Retired carbon credits explained

By News

When we hear the word ‘retirement’, most might imagine a pension, large quantities of free time and perhaps a new-found love of gardening. Given these connotations, it is perhaps unsurprising that used in the context of the voluntary carbon market, the concept of retirement can create confusion.

In the carbon markets, retirement has a different meaning. In its essence, a retired carbon credit means its buyer has ‘redeemed’ the one tonne of carbon reduction it represents and claimed it against their own emissions which they have not yet been able to cut. 

When a buyer retires a credit they have purchased, the credit is removed from the market. This means no one else is able to counterbalance their emissions based on the carbon reduction the credit represents. 

To put this in context, 196 million carbon credits were retired overall in 2022. If these retirements had been evenly distributed throughout the year, more than 500,000 credits would have been retired every, single day. Although this represents a 1.3 percent decline on the previous year, the most recent market sentiment survey from the IETA found optimism among its respondents. Based on the responses from market participants the survey predicts that the market will soon return to a positive upward trajectory.

Wait, how are credits generated?

To truly understand the concept of a retired carbon credit, let us first refresh ourselves on the basics of credits.

What? A carbon credit represents one tonne of carbon dioxide or an equivalent volume of another greenhouse gas (CO2e) that has been either removed from, or prevented from entering, the atmosphere. 

However, historically not all credits have been created equally. Learn more about the criteria for a ‘good’ credit with this article from our archives.

How? A credit can be generated from nature-based projects, technological climate solutions or even renewable energy generation. The volume of CO2e avoided or removed from the atmosphere is calculated and a corresponding number of carbon credits is conservatively calculated. 

The calculation process involves following established methodologies, baseline allocation and verification. Find out more about this process here.

Why? Carbon credits are sold to individuals and businesses to support their decarbonisation strategies. The carbon finance generated from these sales funds further climate mitigation activities and can even support the delivery of impactful, non-carbon benefits for people and nature.

For an example of carbon credits in action, please see this case study of the Gola Rainforest Conservation Project. And to learn more about the responsible purchase of credits, see this flyer on the mitigation hierarchy.

But why do you need to retire credits at all?

In this section we will cover why carbon credits need to be retired, including:

  • Confirming impact
  • Claims
  • Double-counting

When a buyer purchases carbon credits in line with the mitigation hierarchy, the positive benefits of those credits are not automatically attributed to that individual or company. Rather, the buyer ‘holds’ these credits until they wish to retire them. However, once a retirement has been executed, the buyer is free to claim the positive impacts the credits represent. This effectively ends the credit’s ‘life’ for it cannot be reused or reclaimed.

In this way, retirement stops the benefits of credit from being claimed multiple times. In the industry, this is known as preventing double-counting. Only the stakeholder who retires the credit can claim the emission reduction it represents towards its climate targets and they can only do so once. Retirement is extremely important for driving credibility and traceability when using carbon credits to achieve net zero.

What’s the process for retired carbon credits?

Before a carbon project can issue credits, it will complete a process of verification which happens within a framework set up by a programme, such as VCS by Verra or Gold Standard. Only after verification are credits issued in a dedicated registry. Credits are always marked with a unique serial number which allows them to be tracked and accounted for.

Carbon credits can be owned by a number of market participants – the project developer, financing institution, intermediary or a company wishing to use them to counterbalance their own emissions. They can be traded, sometimes several times, among the market participants. This means that carbon credits can exist, unretired, for some time. However, at the point of retirement carbon credits are permanently removed from circulation and cannot be resold. This prevents any double-counting of emission reductions. Information on historic retirements is stored in publicly accessible emission registries, driving transparency for the market.

The future of retired carbon credits

As technology advances, stakeholders across the voluntary carbon market are working to better the carbon markets including the retirement process itself. Blockchain, Tokenization and Distributed Ledger Technology (DLT) all hold great potential for scaling of the voluntary carbon markets. These technologies can boost the overall transparency of credit retirements and support the overall integrity of the markets. We look forward to engaging with new innovations as the world of credit retirements develops and interacts with these emerging technologies.

5 July 2023
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Carbon Credits

“We are not a broker, we’re a carbon finance company”

By News

Traditionally, carbon credits have been bought and sold by brokers on a spot basis, but at Respira, we operate differently, and have helped to shift towards a carbon finance model of carbon credit trading. We recognise that the broker approach creates little long-term certainty for carbon communities, and, at times, even curtails the development of high-quality projects. This is why we offer an alternative – a model prioritising the overall stability of our flagship portfolio projects. 

Respira is not a broker. Rather, we are a source of non-dilutive private capital. We offer revenue certainty for project developers through a guaranteed floor price for carbon credits and use our balance sheet to support them with long-term offtake agreements. Not only does this enable project developers to expand with confidence, but also creates greater certainty for our buyers who can lock-in future prices. 

 

The Respira model

The Respira ethos 

Respira International was co-founded by Ana Haurie and Robin Bowie in 2019. They saw the urgency with which we must address the climate crisis and recognised the role the private sector must play in these efforts. To drive the necessary levels of corporate action, the voluntary carbon market offered great potential. Speaking of the role of high-quality carbon credits in mitigation, Robin said:

“Buying voluntary carbon credits provides an engaging and impactful way for companies to compensate for residual emissions whilst on the pathway to reducing internal emissions. It enables corporations to go beyond what they are mandated to do through regulation.”

He continues:

“Through integrated plans which combine value chain emissions reductions with appropriate use of carbon credits, corporations can set a powerful and engaging example for others to follow.”

Now, four years later, Respira International continues to expand. Our diverse team combines a 30+ year track record in global financial markets with a deep understanding of carbon project development in leading international conservation organisations. 

Reflecting on the Respira team, Chris Villiers, Director of Portfolio Management, said:

“Respira has brought together a team with the network and experience to develop products in the voluntary carbon market that can attract institutional capital at scale that will be used towards reducing emissions globally and deliver significant climate impact.”

The time is now

Our team knows we cannot delay climate action. In the next seven years, we must significantly decarbonise our economies if we are to meet the targets set by the Paris Agreement. Eva Weightman, Director of Corporate Client Relations, said: 

“With 2030 fast approaching, there is no time to sit idle. The world needs business leaders to act with urgency and curb their companies’ emissions if we are to limit global temperature increase to 1.5°C above pre industrial levels. ”

Chief Technology Officer, Jon Mulder agrees:

“The time to act on decarbonisation and nature restoration has never been more critical. The solutions exist today and must be scaled and deployed more rapidly. We all have a role to play and carbon credits provide a vital service in protecting and restoring nature.”

If we are to achieve our 2030 ambitions, Finance Director, Peter Christie, argues that businesses must take voluntary action on climate mitigation.

“In the absence of direct regulation by governments, companies need to voluntarily ramp up their decarbonisation efforts so we can collectively solve the climate crisis. Carbon credits are an essential part of the business toolkit.”

Respira is committed to nature

However, carbon credits are not uniform in the benefits they deliver. Credits can be generated from activities which remove carbon from the atmosphere or from projects that prevent additional carbon emissions from release. But regardless of whether a project focuses on removal or avoidance, they can deliver a great many benefits for people and nature. It is with these projects – those with measurable impacts, aligned with the UN Sustainable Development Goals – that Respira partners.

This is why our flagship portfolio focuses predominantly upon nature-based projects such as forest conservation or mangrove restoration. Director Natural Climate Solutions, Ed Hewitt, further explains Respira’s investment rationale.

“There is a critical need to attach a monetary value to services that nature provides such as carbon capture, water quality, clean air and biodiversity.”

Ed continues:

“Carbon is really the first to be monetised at scale. By doing this we can financially incentivise the conservation and restoration of forests, soils and wetlands, helping us address the twin challenges of climate change and nature loss.”

Josh Schaefer, our Portfolio Director, explains that climate change and nature loss are inseparable challenges.

“Global emissions reductions can’t be achieved without tackling nature loss, because the earth’s natural ecosystems absorb roughly half of man-made carbon emissions – as well as providing numerous other benefits for people and biodiversity. Verified carbon credits have proved to be an effective way to finance the protection of natural ecosystems.”

Our CEO, Ana Haurie, concludes with a call to action:

“The time for the financial sector to act on climate is now. The predicted growth of the voluntary carbon market, with an increasing focus on nature-based solutions, provides a unique opportunity for institutional investors to benefit from this new asset class, while also supporting sustainable development goals and making a positive impact,” she said.

We encourage you to view our introductory video to learn more of our non-broker approach. And if you would like to find out more about our team, you can read more here.

27 June 2023
Love0

Leakage: What does it mean for carbon credits?

By News

When a government declares one forest protected, who’s to say it won’t grant a logging concession for another? If a forest can no longer be cleared for subsistence agriculture, then where do these family farmers go? If carbon project developers are not careful, the answer can simply be: to the forest ‘next door’.

In the voluntary carbon market, this is known as leakage – a situation in which deforestation activities are not prevented, merely shifted from one area to another. It is a conundrum with which the market has grappled for years. Yet, despite making progress on leakage limitation, the ways in which project developers tackle the issue are not generally well understood. Cue this explainer.

What is REDD+?

But first, we must lay the foundations. Without a solid understanding of REDD+, you will likely be lost when it comes to the matter of leakage. Broadly, REDD+ refers to forest conservation activities but it also has a more specific meaning. According to UNFCCC, REDD+ activities work to “reduce greenhouse gas emissions from deforestation and degradation while promoting the sustainable management of forests and the conservation and enhancement of forest carbon stocks.”

REDD+ can occur at different scales. There is project level – usually tens to hundreds of thousands of hectares and normally run by NGOs or social enterprises – and there is the jurisdictional level – typically millions of hectares and can be run by a project developer under national or subnational frameworks. For every type of REDD+ project, it must ensure local people have the chance to give their free, prior informed consent to its activities and that is before it is verified by the industry’s standards bodies.

Whatever the scale, REDD+ can address different types of deforestation and degradation. There is avoided planned deforestation and avoided unplanned deforestation. Unplanned deforestation is inherently local, driven mainly by subsistence agriculture whereas planned deforestation usually takes place under government approved logging or agricultural development concessions. However, concessions need not always be destructive – they can be granted for conservation activities too.

When does leakage occur?

The risk of leakage presents differently depending on the project type. In avoided unplanned deforestation projects, leakage occurs when subsistence farmers stop clearing trees inside the conservation area but instead cut the trees outside of it.

In avoided planned deforestation projects, leakage can occur if the government hands out a concession for an NGO or social enterprise to conserve one area of forest while simultaneously granting a different concession to a company to log another. However, if a project operates on a jurisdictional level, the risk is that the deforestation or degradation activities are shifted to the neighbouring jurisdiction.

But whatever the project type, when leakage does occur, it underlines the level of pressure facing forests. If there is leakage, there is clearly a need for more conservation activities in an area. 

What can be done to address leakage?

There is a misconception in carbon markets that leakage from REDD+ projects continues unaddressed. Yet this perception is outdated –  leakage limitation has always been considered and incorporated into a project’s design. 

Whether it operates at a project level or a jurisdictional level, developers assess leakage risk as part of their verification processes and to monitor deforestation in its ‘leakage belt’ – an area outside of the project’s own conservation remit. Based on these calculations, it is standard practice for a project to set aside between 10 and 20 percent of the credits it produces as insurance against forest damage or leakage. This is known as a buffer pool.

What’s more, project’s often work to tackle the underlying drivers of deforestation and degradation in the surrounding landscape. In avoided, unplanned REDD+ projects, leakage can be addressed by offering alternative income streams to subsistence farmers and educating local people on agricultural practices.

It can also be tackled through the sustainable intensification of agriculture. While this might sound like an oxymoron, it is actually a clever conservation strategy. It shifts agricultural expansion away from standing forests and towards marginal lands or to areas historically cleared.

On the other hand, addressing leakage from planned deforestation usually requires government cooperation. If logging is identified as a major cause of emissions, market leakage is one way to reduce risk. Developers would use a national timber extraction figure and calculate the percentage of forest potentially lost to logging across the project area.

Indeed, if deforestation reduction targets are set at a jurisdictional level, it can incentivise conservation across the whole country for governments, bound by national commitments, are less likely to offer conservation concessions in one area and logging concessions in another.

At the same time, it must be acknowledged that coordinating all the political, economic and social actors in a jurisdictional REDD+ project can be a challenge. This role sometimes falls to NGOs, but there is a case to be made that this should be a government’s own responsibility. 

Regardless of whether a project works to prevent planned or unplanned deforestation, if leakage persists the developers will take precautionary action. They will reduce the overall number of credits issued by the project to prevent instances of over-crediting. 

Case study: Leakage limitation success

Makame Savannah, a project developed by Carbon Tanzania, has been successfully working to address the drivers of unplanned deforestation around its expansive conservation area. Spanning more than 360,000 hectares, this Wildlife Management Area has become a safespace for trees and wildlife. Indeed, since the project began in 2016, more than one million trees that would otherwise have been cut continue to stand. Based on Makame’s conservation work, 517,000 carbon credits have been verified and issued, including 330,00 to Respira.

Carbon Tanzania has woven leakage accounting into the very fabric of Makame Savannah’s project design. Taking a conservative approach to calculating leakage and issuing credits, 28 percent are not sold on the market, withheld instead as a buffer. At the same time, Carbon Tanzania operates proactively, engaging in specific leakage mitigation activities to reduce overall risk. 

What’s more, Carbon Tanzania works directly with local communities to address the underlying drivers of deforestation. The foundation of this approach is to reduce the daily cost of living to individuals and therefore reducing the financial necessity to fell trees for short-term economic gains.

Therefore, Carbon Tanzania ensures that revenues from these credit sales are distributed to members of the local community. So far these funds have been predominantly allocated to education and healthcare. Children have benefitted from scholarships, which has simultaneously lifted financial pressure from their families. Many individuals have received health insurance cards which, funded by the project, allow them to be treated in local hospitals for free. And in October 2022, more than 60 students had their university fees entirely covered by carbon revenue. 

Makame Savannah also employs local people for surveillance. Together, the team monitors the area for signs of poaching and agricultural expansion, catching some of the underlying activities driving deforestation early on. These holistic approaches adopted by Makame Savannah work to reduce leakage around the project area and clearly demonstrate how leakage can be minimised if effectively factored into a project’s design.

Projects like Makame Savannah give us confidence that the risk of leakage is taken seriously by project developers. However, while efforts are made to tackle the underlying drivers of unplanned deforestation and degradation, we also understand that occasionally leakage can still occur. Standard practice in the market provides assurance. In the event of leakage does occur, less credits are issued and a projects insurance buffer pool prevents any over-crediting from taking place.

 

 

 

12 June 2023
Love0

When are carbon credits most effective?

By News

It is often said that a bad workman blames their tools. As with many old proverbs, this saying does contain a morsel of truth, especially when applied to the voluntary carbon market. 

Recently, we have seen more cases of criticism directed at carbon credits and those who use them. But this is not always justified; it is not the credits themselves which are to blame. They are simply a mechanism which – when used wisely – can drive action for climate and nature. 

So while critics are busy accusing companies of using carbon credits to avoid meaningfully reducing emissions, a study has been quietly investigating the reality of this claim. Its findings revealed this statement to be far from the truth – it reported a positive correlation between an investment in carbon credits and the speed with which a company decarbonises.

So if it’s not the carbon credits themselves, then what can go wrong? Issues can arise during both the supply and the demand stages, so it’s important to understand what constitutes best practice. Choosing the best solution is challenging, particularly if you are new to the market, so here we outline the key traits which define high quality supply of, and high integrity demand for carbon credits. 

High-quality supply

In many ways, the success of including carbon credits within a corporate net zero strategy is determined long before a company decides to counterbalance their emissions. Ultimately, success is reliant upon the original quality of the credit supply which places a lot of responsibility on the shoulders of carbon project developers.

Firstly, developers must ensure that their project – be it forest conservation or mangrove restoration – would not have been possible without carbon finance. Only if credits are generated from an activity that would not otherwise be possible, can a project be classed as ‘additional’. When searching for high quality, it is essential that buyers check if a project’s additionality is verified.

Project developers should also take every precaution to ensure the benefits of their project are long-lasting. This applies, not just to its potential for climate mitigation, but also to any beyond-carbon benefits it offers to local people and the surrounding biodiversity. If a project’s impacts are short lived, it is not possible to consider its credits high quality.

The good news is that the voluntary carbon market is increasingly regulated. Buyers should always look to see if carbon credits are verified before they purchase. This means that any advertised emissions reductions have been measured and accounted for by an independent third-party agency. This includes analysis of the scientific methodologies used to calculate project baselines and regular surveillance of project areas. Emerging ‘nature tech’ is already paving the way for increasingly reliable verification across the carbon markets. 

There is also increasing guidance available to help buyers understand the characteristics of high quality carbon credits. For example, earlier this year, the IC-VCM released the much-anticipated Core Carbon Principles to set a minimum criteria for high quality carbon credits. This will help corporates to evaluate credits prior to purchase and ensure that they are engaging with climate solutions which bring genuine, long-lasting benefits.

 

High-integrity demand

However high the supply-side quality, credits cannot drive meaningful climate action unless the demand side operates with integrity. Corporates are encouraged to follow the mitigation hierarchy when considering using carbon credits to support their environmental action. This model advises that carbon credits are purchased only after every effort has been made to cut emissions from across the company’s value chain.

 

A diagram of the mitigation hierarchy which shows carbon credits as the fifth and final measure companies should consider in their net zero strategies. First they should avoid, minimise, rectify and reduce.

Recent years have seen growth, both due to mandatory disclosure and reporting initiatives such as the TCFD, and from the voluntary carbon market. More than 3,000 corporations have so far set net zero targets and are increasingly motivated to demonstrate their climate credentials to end consumers. This means many more are opting to voluntarily purchase credits to counterbalance their residual emissions in the near to medium term.

As more corporates are turning to carbon credits, organisations such as the VCMI focuses on regulating the environmental claims which can be made following purchase. Its work on the Provisional Claims Code of Practice is designed to address allegations of greenwashing and to ensure any claims made are entirely science-based and credible. 

Speaking of the growing body of regulation and guidance, our Director of Business Development Will Close-Brooks said: 

“If we take all of these together, we see an increasingly robust foundation from which the market can grow with integrity over the coming years.”

Indeed, operating under these guidelines, carbon credits are truly a mechanism to celebrate. Sourced from high quality projects and implemented with integrity, they hold enormous potential to drive climate action.

 

For more information on what makes a good carbon credit, please consider our previous article here.

9 May 2023
Love0

CEO Ana Haurie Shortlisted for UK Green Business Award

By News

Our CEO, Ana Haurie, has been shortlisted for Leader of the Year by the UK Green Business Awards. We look forward to hearing the results announced at the awards ceremony in London on the 29th June.

 

The UK Green Business Awards are returning after a 15-year hiatus. Revamped with new categories, these awards are intended to showcase the very best individuals and companies working in green business across the UK. 

We are delighted to see such a range of innovative work recognised in the shortlist. Receiving hundreds of entries, the success of the UK Green Business Awards is testament to the growing commitment of corporations to pursue climate action, not least within the voluntary carbon market (VCM). 

Ana is determined to help the VCM scale and better fund nature-based solutions, as well as being committed to ensuring that this is done with transparency and credibility. 

To achieve these goals, Ana has built a team at Respira with a deep experience in global financial markets and with extensive knowledge of carbon project development at leading international conservation organisations. 

Under her guidance, our team conducts due diligence on all our carbon projects to ensure they deliver truly genuine, measurable and additional impacts that benefit both the environment and the local community. As a result, we have built partnerships with high-quality carbon projects which collectively prevent over 5 million tonnes of CO2 from entering the atmosphere every year. What’s more, the projects have created more than 5,000 jobs for local people and at least 30 endangered species are now protected inside our project areas.

We would like to congratulate all the finalists on their achievements. Together, their outstanding work is helping to drive the UK forward towards net zero and a greener, more-sustainable economy.

A woman named Ana Haurie stands, surrounded by green leaves and trees. She wears a black blazer and a dark pink top and is smiling directly at the camera.

25 April 2023
Love0

Respira in Pakistan: Mangrove restoration on an immense scale

By News

Neatly planted mangroves stretch hundreds of thousands of hectares – a growing beacon of climate mitigation within a sea of containerships and fishing vessels. Bright green and full of life, these mangrove forests pose a striking juxtaposition to the industrialisation of Karachi’s port located at the far north of the project.

At the beginning of March, two members of our team were fortunate enough to visit Karachi – a sprawling microcosm of Pakistan and home to more than 20 million people. This was no tourist trip; CEO Ana Haurie and Director of Portfolio Management, Chris Villiers, were touching base with one of our flagship portfolio projects: Delta Blue Carbon.

Blue carbon refers to marine and coastal ecosystems – such as mangroves, seagrass meadows and tidal marshes – which can remove carbon dioxide from the atmosphere. We have recently published an article explaining the term and these ecosystems’ roles in climate mitigation if you would like to learn more.

A brown dirt track leads to a dark green mangrove plantation. Arranged in neat rectangular patches, two people tend to the saplings.

Delta Blue Carbon currently holds an impressive record. As the world’s largest blue carbon project, it is working to conserve and restore mangrove forests across 350,000 hectares of tidal river channels off the southeast coast of the Province of Sindh. Reflecting on her first impressions of the project, Ana said:

“The scale of the project was massive and monumental. When you read or see a PowerPoint, it’s hard to get the full impact of the work these projects are doing. But when you visit a project first-hand, it becomes even more meaningful.”

Chris was also struck by the scale of the project:

“It’s hard to process the extent of the restoration,” he said, “Even spending two days on a boat, we touched only a tiny corner of it.”

The scale of mangrove operations

Such is the scale of operations in Karachi that Delta Blue Carbon has planned mangrove planting schedules stretching to 2029. These plans are ambitious – in 2023 alone, the team hopes to have planted an additional 20,000 hectares of land. Ana remarked on the sheer logistics of these plans:

“When you see the project up close, you realise it’s such a feat to actually get it done! That was another thing which dawned on me was the determination that you have to have to make something like this a reality – it’s so impressive,” she said.

This large-scale project is the result of a pioneering public private partnership between the government of Sindh and a private project developer, Indus Delta Capital. Both Ana and Chris observed that local governments participation has been instrumental to the project’s success.

With over 20 years of planting experience, the Government of Sindh’s Forestry Department has shared valuable knowledge on the most appropriate tree species for the region to ensure resilience and biodiversity benefit. Although four mangrove species are planted in the project area, Rhizophora and Evercinia are most common due to the prevalent local conditions. This highlights the importance of working with local experts who can ensure that reforestation is truly context specific and appropriate for the ecosystem in question.

A man in a pink shirt holds two green mangrove saplings. One is the species Rhizophora and the other is Evercinia.

Rhizophora and Evercinia mangrove saplings.

 

Community participation

An estimated 42,000 people live in the project area and the team are confident that at least 20,000 have, in a variety of ways, benefited from its existence. Chris and Ana explained the four main ways in which people can participate:

  • The planting season brings with it ample temporary employment opportunities. In teams of 20 to 30, people set out to plant mangrove saplings. They are not immune from competition – the team proudly declared that they hold the Guinness World Record for the most planting in a single day!
  • Others gain temporary employment as re-stockers. These teams sail out to areas planted 10 months previously to replace any trees which have failed to grow. From here, the mangroves move to a state of self-sufficiency as they are fantastic self-seeders. With the right conditions, each area can become densely populated within 5 years of planting.
  • Local families or other members of the community can also take their own initiative to supply propagules (mangrove seeds) to the project developer for future planting in return for payments. Paid by the bag load, propagule collecting has become rather popular in the area. Ana and Chris recount how they saw a group of men building a high bank on the mud flats that would act as a collection point for seeds they planned to gather in the coming weeks.
  • The community also puts forwards certain individuals to act as stewards of specific areas of the project through the Mangrove Stewardship Program. . These individuals sign an agreement to protect the planted areas from harm and receive a salary in exchange for their labour. To date, 136 people have signed up to the program.

Considering these opportunities for community participation, Ana remarked on a palpable feeling of ‘collective buy-in’ from many local people. Chris voiced his agreement:

“We heard directly from people that they saw tangible value in the project. It feels like it is making a real difference to their lives.”

“That’s what the carbon markets can do,” Ana added. “It’s for the climate; it’s for biodiversity and it’s for the communities,” she paused for thought. “And that almost becomes more important.”

 

A blue landscape picture showing the calm waters off of Karachi, Pakistan and the cloudless blue sky above.

A group of 11 people, dressed predominantly in shirts, trousers and sun hats, stand by the side of the water.

A blue, decorated boat is mored in shallow waters in Karachi, Pakistan. Two men are on board, tending to mangrove saplings ready to be planted.

Picture credit: Ana Haurie & Chris Villiers

18 April 2023
Love0

International Women’s Day: Climate solutions need female voices

By News

Evelyne Ligoberth Kapaya is a carbon champion. From her home in Katuma Village, Tanzania, she spends much of her time discussing deforestation and climate change. She sits down with local residents to raise awareness, not only of the impacts of tree felling, but also of solutions to the crisis. She is one of the many women around the world working to safeguard the future of our environment and is very much deserving of our celebration this International Women’s Day.

Every year on the 8th of March, we have an opportunity to acknowledge female achievements around the globe. However, at the same time, International Women’s Day is also a call to action. We need to better recognise women from history; we need more women in leadership positions and we urgently need more female voices, like Evelyne’s, in climate solutions.

Women are disproportionately affected by climate change

While the impacts of climate change undeniably touch the whole community, 68% of the 130 studies reviewed by Carbon Brief found that women and girls face more climate-related health risks than men and boys. Indeed, the article reports how women and girls are more likely to be adversely affected by harvest loss and are often the ones walking further to collect water during times of scarcity. Overall, the report concludes that existing gender inequalities tend to be exacerbated by changes to the climate and although women are not always experiencing the worst health outcomes of climate change, they are disproportionately affected.

Climate mitigation will be stronger with women

Given this disproportionate impact, women must be actively involved in the development and implementation of climate solutions for they have lived experience of the unique risks climate change presents for them in their area. This is especially important when the allocation of carbon revenue is decided.

Faraja Oswald Alberto works as a Finance Officer for Carbon Tanzania’s Ntakata Mountains project. Developing short and long term accounting plans with her local community, she has seen first hand how carbon finance has changed the area:

“Before the start of the Ntakata Mountains forest protection project, there was an invasion and massive clearing of forest areas. Our lands were badly damaged. After that, the community decided to make a plan for the best use of land and implemented a forest carbon project. Gradually, the environment began to improve as the community received carbon finance to support sustainable projects and forest conservation.”

This forest conservation has been supported by the growing number of female Village Game Scouts trained in Tanzania. Faraja continues:

“Village Game Scouts are now fully employed by their respective villages to protect the forests and are paid a monthly salary from the carbon credit revenue. Groups of entrepreneurs benefit from small loans made possible by carbon finance from Cocoba (Community Conservation Banks) to run their various wealth-producing activities. This is improving the local, community economy.”

Tatu Amani Mwita is a female entrepreneur who has benefitted from Cocoba finance. She owns a small restaurant in Kapanga Village which received loans from Cocoba to purchase equipment and expand the size of her restaurant. Now, Tatu employs six other women and her restaurant can run independently of loans. 

Equity is essential

This year, the  theme of IWD is equity. It was chosen to show how offering equal opportunities can still be exclusionary. On the face of it, an equality of resources and opportunities seems positive. Such a state is, afterall, an improvement when compared to much of the inequality we see today. However, equality does not allow for difference – everyone receives the same regardless of circumstance. Equity, on the other hand, recognises differing situations and allocates resources and opportunities accordingly. Understanding these differences is an essential first step to building, and facilitating, effective, equitable, climate solutions.

Equality-based solutions and equity-based solutions

What do these differences look like in practice? Well, equality-based solutions tend to be founded in impartiality whereas equity-based solutions consider the diverse and varying experiences of individuals and tailor solutions to account for these differences. As a result, equity-based solutions are more long-term for they address issues on a deeper level than those founded on equality. For women, this distinction is key. For instance, the women affected by climate-induced floods in California will have a radically different experience to women facing extreme flooding in Pakistan. Therefore, solutions must be context-specific if they are to be effective.

For climate, we must ensure that nature-based solutions are also equity-based solutions which actively involve and seek the participation of women. And this need not be confined to one day a year. Every day you can consciously amplify the voices of women, share their work with your networks and celebrate the achievements of your female colleagues. See our flagship portfolio projects to find out how carbon finance supports women.

 

Picture credit: Carbon Tanzania and Roshni Lodhi.

8 March 2023
Love0
Carbon Credit

Nature-based carbon credits explained

By News

From the dense forests of Brazil to the deep Pacific ocean, our planet has an innate ability to remove CO2 from the atmosphere. For hundreds of years nature has acted as a shield, protecting us from the worst impacts of our own, ever-increasing emissions. Yet, there is a limit – nature cannot continually mitigate without receiving care and investment. While many are waking up to the power of nature in our global climate crisis, it’s still fair to say that its true value is not yet reflected economically. 

However, we have tools at our disposal to help rectify this imbalance. Nature-based solutions (NBS) are one way to drive finance to conservation and restoration. These solutions involve working with natural ecosystems – such as forests or oceans – to address global challenges. The IUCN Global Standard expects NBS to provide a net positive impact on biodiversity, while simultaneously empowering stakeholders.

A similarly named subset of NBS is natural climate solutions (NCS). These are nature-based solutions that specifically address the climate crisis. They can be divided into two categories: those which avoid emissions from being released, for instance through the prevention of logging degradation or burning or existing forests, and those which remove carbon from the atmosphere via the creation of new, natural carbon sinks. Unlike NBS, the minimum requirement for NCS – as stated by The World Business Council for Sustainable Development (WBCSD) –  is that they result in zero net loss for biodiversity. But regardless of whether a project is NBC or NCS, it should be high quality – its benefits should be real, measurable, additional and permanent.

 

The need for nature 

To keep 1.5°C in reach, the IPCC states that we must achieve net zero by 2050. Meeting this target requires rapid decarbonisation and extensive climate mitigation which is a huge challenge. But there is hope. It is widely agreed that the natural world can deliver up to one third of the climate mitigation required by 2030 (see picture below). Indeed, it has been calculated that if nature-based solutions are effectively deployed, it could be possible to reduce and remove at least 5 – and potentially 11.7 – gigatons of CO2e from the atmosphere every year.

Therefore to hold open the rapidly closing door on 1.5°C, we need to tap into this potential. But this requires sustained, financial commitment from global, national and corporate actors. At present, nature-based solutions receive approximately $133 billion of public and private funding every year. While this sounds substantial, it is, in fact, only a conservative 25% of the level needed if we are to reach our 2050 climate target.

 

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The grave, green problem

Deforestation poses a massive threat to the world’s green carbon sinks. Currently most prevalent in the tropics, trees are felled at scale to make way for cattle ranches, soybean plantations and to meet global demand for timber.

Deforestation places the world’s future in jeopardy. Not only is deforestation a major threat to global biodiversity, but it also reduces the capacity of the world’s forests to capture carbon. Trees naturally take in CO2 when they photosynthesise and, without them, we would have significantly more carbon in the atmosphere than we do today. But when trees are cut and burned, they release carbon. Tragically, the volume of carbon currently emitted from global deforestation and degradation is second only to fossil fuel combustion. Without action to halt deforestation, our greatest carbon sink will remain a significant carbon source.

The world’s forests are also critical for global temperature and rainfall regulation. Water evaporating from the leaves of trees creates a cooling effect on the surrounding environment, while the unevenness of forest canopy’s alter wind speeds, further dispersing rising heat. This ability of trees to cool the planet means that tropical deforestation actually contributes 50% more to global warming than straight up carbon accounting suggests. 

 

The great, green solutions

To prevent deforestation and safeguard our natural carbon sinks, we must take action. It is estimated that 62% of the reductions and removals facilitated through NBS will come from forests and we know that these solutions are here now and ready to scale. 

Conservation

It doesn’t make sense to be losing forests faster than we are planting them, in the same way as it makes no sense to leave the taps running when trying to drain a bath. Moreover, newly planted trees take many years to achieve the same carbon storage capacity as existing, mature forest. Indeed, some Amazonian trees are hundreds of years old so are completely irreplaceable in the window left available to us to avoid the worst impacts of climate change.

Forest conservation, or REDD+, is a well-known method through which to generate nature-based carbon credits based on emission reduction. Independent assessors verify how many tonnes of carbon are stored in a particular landscape’s trees. By measuring the area of trees that has been protected from being cut down, the amount of carbon that has been stored due to a project developer’s conservation can be calculated. From here, a conservatively corresponding volume of carbon credits can be sold via the voluntary carbon market. 

Amid recent critiques, recognising high-quality forest carbon credits is of utmost importance. This means that the conservation would not have been possible without the finance generated through the sale of carbon credits and that the project is, as far as possible, permanent. High quality REDD+ projects typically withhold 10-20% of credits as a leakage and non-permanence ‘buffer pool’ – insurance – in case of fires, pests, or other potential factors that reduce net carbon storage. The revenue from the credits is shared equitably with project communities who decide how to spend it.

Reforestation & Afforestation 

While we should prioritise conserving our existing trees, there are occasions when planting is a very appropriate course of action. 

Reforestation is when trees are planted in an area from which they have recently been felled. It aims to restore forests to their previous state following degradation. Afforestation, on the other hand, refers to the planting of trees on land where none previously existed. It’s important not to be too literal here – don’t think never, think land which has not been recently deforested.

Unlike forest conservation, reforestation and afforestation both remove additional carbon from the atmosphere. As such, these projects generate removal credits and, if done well, can be extremely beneficial to local biodiversity. 

Planting trees in urban environments can also be extremely positive. A recent study of 93 European cities found that raising tree cover by up to 30% (depending on existing levels), can reduce the average temperature by 0.4°C. This may sound minimal, but is enough to reduce heat-related deaths.

 

The big, blue problem

Spanning 72% of the earth’s surface, it is common knowledge that our oceans regulate the climate. Since 1850, the oceans and coastal ecosystems have absorbed a staggering 40% of anthropogenic emissions. Yet, as with forests, this ability to slow climate change is being undermined by human activity. Pollution, marine warming and overfishing all contribute to ocean and coastal degradation. 

The brilliant, blue solutions

To fund the protection of these ecosystems, it is vital we invest in NbS generating blue carbon credits. Mangrove restoration projects – such as Delta Blue Carbon – are already sequestering carbon from the atmosphere, while seagrass has recently received attention for its enormous potential for capture. Indeed, McKinsey reports that even if we just used the currently established blue carbon solutions, they could remove between 0.4 and 1.2 metric gigatons of CO2 from the atmosphere every year (see graph below).

 

(Source: McKinsey Blue Carbon report, 2022)

 

NBS ‘done right’

If implemented with integrity, NbS can help us to meet the goals of the Paris Agreement, protect natural ecosystems and support the rights of Indigenous Peoples and local communities. However, purchasing nature-based carbon credits is not a substitute for direct decarbonisation of the corporate value chain. Rather, investing in these solutions is a way for a company to faster meet, and eventually exceed, its emission reduction targets. 

Indeed, prior to purchasing nature-based carbon credits, an organisation should already have set science-based climate targets and be implementing emission reduction in line with the mitigation hierarchy (see picture below). These principles are also outlined in the NCS for Corporates Guidance.

 

 

Now is a pivotal moment for NBS. Either we enter a negative feedback loop in which deforestation and ocean degradation become key drivers of climate change. Or, we engage in a positive cycle of capacity building and climate change mitigation. The second option is in reach – NBS are here now and readily available to scale – but urgently require funding. Buying carbon credits through the voluntary carbon market helps to channel this much-needed finance to high-quality NBS projects. Contact us to find out more about our portfolio of these high-impact, high-integrity climate mitigation solutions.

14 February 2023
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6 questions to resolve in order for carbon markets to deliver more for nature

By News

By Ed Hewitt, Director of Natural Climate Solutions. First published by Carbon Pulse, 7th February 2023.

The latest debate arising from the Guardian’s recent article criticising ‘rainforest carbon offsets’ has brought the topic firmly to the forefront of public attention again. My position remains that carbon markets can be an incredibly important tool to finance nature-based solutions (NBS) at the scale required to be meaningful on a global scale [1]. However, there are some serious questions which must be resolved as soon as possible if verified (not just voluntary) carbon markets are to deliver their full potential for nature.

Context

Despite accounting for what seems like 99% of the conversations about financing nature, carbon markets still account for less than 1% of total global spend on NBS [2]. However, carbon markets are heralded by many (myself included) as a much-needed way to bring significantly more private finance to the sector. Estimates range as to precisely how much [3], but assuming Mark Carney’s projection of $100 billion per year by 2030 is a reasonable figure, directing half of that to nature could provide 12.5% of the total NBS financing required by 2030 [4] (i.e. not the panacea, but a very material contribution).

Unlocking this potential is hard though. The last 12 months have presented what many would observe to be a perfect storm of challenges for the market – notably a global economic downturn, continued debate over claims and quality (which has resulted in continued negative publicity in mainstream media) and uncertainty about the specific implications of Article 6 for nature-based projects. Demand in 2022 for retirements from nature-based credits in the voluntary carbon market dropped by 30% (53 mln in 2022 vs. 76.7m in 2021 according to AlliedOffsets’ data) and prices for the benchmark nature-based traded contract (the Xpansiv CBL N-GEO) fell by two thirds from over $14/tonne in December 2021 to below $5/tonne in December 2022.

We shouldn’t lose hope despite these concerning headlines. There are some specific technical reasons [5] accounting for the price falls in the N-GEO and, in contrast, there were a number of promising signs for the longer term in 2022. Despite the tough macro conditions, OTC sale prices for ‘high-quality’ NBS projects held up relatively well. Respira had first-hand experience of the Delta Blue Carbon project in our portfolio achieve a price of $27.80 for 250,000 tonnes in the auction conducted with CIX. This is at last a meaningful price for a meaningful volume. Market infrastructure and guidance further advanced; the first drafts were published of the Integrity Council on Voluntary Carbon Market’s (IC-VCM) Core Carbon Principles (CCPs) and the Voluntary Carbon Market Integrity’s (VCMI) corporate claims code of practice, and there was progress on Article 6 which could prove a huge market stimulant for nature-based projects. Further, a recent Abatable report showed that although nature-based credit retirements decreased in 2022, investment into ‘upstream’ (i.e. future supply of) nature-based carbon projects and developers reached record levels [6]. These represent some encouraging signs, but what specifically remains to be resolved in order to truly unlock the potential?

I believe there should be 6 questions at the top of everyone’s mind for the VCM in 2023:

1) Will there be agreement about what nature-based carbon credit ‘quality’ looks like and will this build widespread trust?

As highlighted by the recent Guardian article and the following debate which has ensued, ‘trust’ in the climate (and social + biodiversity) integrity of nature-based credits is not as high as it needs to be. Some of this criticism is justified whilst some is based on a misunderstanding of the methodologies and on the ground realities of the projects. Either way, many people are confused, which is never good for scaling a market. The recent rise of carbon ratings agencies (such as Sylvera, Be Zero and Calyx) are useful attempts to make sense of ‘quality’ (although should be viewed as risk assessment tools rather than the ‘unquestionable truth’) and the IC-VCM’s attempt to develop CCPs is a needed attempt to address these concerns and ensure an underlying and consistent benchmark of ‘quality’. My hope is that the CCPs can be accepted by communities, developers, buyers and financiers alike in 2023. However – the principles do need to also be workable in practice – especially for nature-based projects – and that was one of the biggest areas of pushback with last year’s draft guidance which will need to be resolved in 2023.

This topic of trust is particularly an issue for forest conservation projects which were the specific subject of the Guardian article which called into question their ‘baseline’ integrity (the amount of deforestation which would have occurred in the absence of the project). Confusion also abounds with the mind boggling different uses of the term REDD(+) and whether it is carried out at project, jurisdictional, or national scale. This has all contributed to demand for forest conservation credits not increasing as expected (REDD retirements in 2022 saw the biggest drop off of any credit type). The accuracy of some of the more sensational negative headlines on baselines have been robustly challenged, but uncertainty still reigns. The hope is that new Verra methodologies which require projects to use national ‘nested’ baselines should ensure that new projects coming onto the market don’t suffer the same credibility issues. Similarly, due to the increased jurisdictional and national scale of the pending ART TREES credits, baselines should also be less of an issue with these credits too. It’s not inconceivable that a new crediting standard and mechanism may also emerge. But importantly – it’s crucial that these different crediting mechanisms, operating at different scales can exist side by side and reinforce, rather than undermine, one another. When these issues are resolved, then trust in the climate integrity of forest conservation credits can be regained. Let’s not forget that deforestation and degradation causes 10-15% of global GHG emissions and that rewarding communities, private landowners and governments for protecting forest under threat with results-based payments from corporates is one of the best tools available to halt deforestation.

2) Will corporate claims guidance be agreed and gain widespread acceptance?

It’s a crazy situation where corporates are currently ‘greenhushing’ for fear of making the wrong claim. Or simply withdrawing from and not entering the market because of a fear of reputational scandals. Claims drive the market in the short term, and we need clarity and consistency ASAP. In particular, specific guidance will be needed about whether ‘carbon/climate neutral’ can still be used. That’s the most widely used claim and drives near-term demand, but it’s also one of the most controversial and poorly defined (it’s currently the subject of a court case in Germany). If it’s continued to be allowed (or is replaced by a different term with clearly beneficial implications for the buyer), specific guidance will be needed about whether it can be met with avoided emissions credits (which are still by far the most common form of nature-based credit) and whether a Corresponding Adjustment will be required. If this is done well, we could see the emergence of a semi regulated market here where corporates are required to disclose the specific credits they are retiring and the associated claims they are making – further taking this out of the ‘voluntary’ only space.

My hope is that the two most influential external bodies in this space – SBTi and VCMI – will be aligned in their guidance here. Different bodies recommending different things is never helpful for markets and we all seek consistency and clarity.

If quality and claims are both fully agreed and accepted, I think that ‘greenwashing’ accusations can be put firmly to bed.

3) Will Article 6 of the Paris Agreement be friend or foe for nature-based credits?

Whilst it looks on first glance as though Article 6, which enables the trading of emissions reductions between countries under the Paris Agreement, will be a good thing for nature-based credits, the devil is of course in the detail. Specifically:

  • Which specific nature-based credit types and methodologies will be eligible under 6.2 or 6.4? This will be key for establishing whether existing or new nature-based projects currently being designed will be able to benefit or whether new crediting mechanisms for nature-based projects will need to be developed. It currently looks like 6.2 will have more flexibility to use existing standards, whereas 6.4 looks like it will be a replacement for the CDM which may require new methodologies to be written.
  • Will there still be demand for voluntary credits which do not fit within the Article 6.2 or 6.4 framework? It would be a huge shame to throw away all the impactful climate mitigation projects which don’t end up complying with Article 6, so hopefully a thriving voluntary market with clear quality and claims guidance can continue outside of the Article 6 framework. However, very clear guidance from VCMI (and others) will be needed into what specific claims can be made with these credits (specifically related to what you can and can’t claim with or without a Corresponding Adjustment (CA). The big issue right now with Article 6 is timing. It’s not clear exactly when any of these questions will be fully resolved, yet it makes no sense for the planet to hang around until they are sorted. Climate action can’t wait for perfection.

4) Will compliance programmes allow in more nature-based credits?

Currently, the vast majority of nature-based credits are not eligible for compliance markets. They are under voluntary standards and mainly transacted on the voluntary market. Yet it’s in compliance markets where the real scale lies and high price points can be found ($850 bln market size for compliance markets globally vs just over 1$bn for voluntary in 2021, according to Refinitiv). There are of course some exceptions – California, South Africa & Colombia are good examples where a limited number of domestic nature-based credits are allowed in and the airline scheme CORSIA has approved a limited selection of methodologies for international nature-based credits. However, these are currently small in scale and are all markets with low prices. Article 6 does give rise to the prospect of more international trading for compliance markets, but ultimately policy makers (especially for the largest market – the EU ETS) are going to be unlikely to allow in more nature-based credits until debates about quality are settled. Once they are, it opens up a whole new window for finance to flow – a good reason why we are seeing an evolution of the VCM terminology from ‘voluntary’ to ‘verified’ carbon market.

5) Will biodiversity credits gain traction? And if they do, what will be the implications for nature-based carbon credits?

It finally seems that biodiversity crediting is gaining traction on the back of the Montreal biodiversity COP. ‘Nature positive’ is gaining momentum as a term corporates can use and a few practical frameworks for measuring a standardised unit of biodiversity have now been proposed. Plan Vivo has developed the first crediting methodology. Similar initiatives are also underway at Verra and other standard bodies. My feeling is that these will be developed and adopted very quickly given the urgency and momentum, although it is worth acknowledging that we are still at a very early stage in their development vs carbon markets and the market infrastructure (including safeguards and MRV systems) is yet to be built. Although this a great development for nature-based projects, it could be a long-term risk to the premium price currently enjoyed by nature-based carbon credits with high biodiversity co-benefits (particularly those co-certified by CCB)

6) Will macro-economic growth return?

Of course, this is beyond the control of nature- and carbon-market actors, but it was a large contributor to the downturn in 2022. When growth returns, budgetary constraints for corporate buyers should ease and demand should return. The 2022 macro-economic conditions particularly hit nature-based carbon project retirements as voluntary nature-based credits still tend to trade at a significant premium (+50%) to other common credit types such as renewable energy and household devices. Indeed, 2022 saw a trend for corporates turning back to cheaper technology-based credit types (retirements of renewable energy credits increased from 90 mln in 2021 to 105 mln tonnes in 2022 according to Allied data).

Due to the severity of the climate emergency, we need to act at speed and scale. Nature-based solutions hold the key to one third of the climate mitigation needed between now and 2030 and come with a myriad of co-benefits for biodiversity and people when done right. We need new and increased ways in which to fund them. Carbon markets may not be perfect, but they are improving all the time, and can be a critical way of channelling private capital into nature-based solutions. We know the challenges, and by working collaboratively to solve them we can unlock this puzzle. Resolutions to these questions are within reach. Let’s make the next series of Guardian articles be about how the challenges were addressed successfully!

 

[1] (around $400 bln of investment is needed annually by 2030 according to UNEP, delivering over 10 bln tonnes per year of CO2e reductions and removals by 2030)

[2] Primary demand in voluntary carbon market in 2021 was around $1 bln of which around half was for nature based credits according to Trove Research. UNEP estimate $133 bln annually was spent on NBS in 2021

[3] Trove estimate $296 bln by 2035 in high demand tight supply scenario, BNEF show a scenario of $1 trillion by 2037

[4] UNEP state of finance for nature estimates $400 bln annually needed for NBS by 2030. $50 bln is 12.5% of that.

[5] The N-GEO is an illiquid contract with tiny volumes traded and no control over which project you end up with

[6] Abatable’s report shows over $10 bln of VCM deals were announced in 2022, with a further $16 bln estimated deals completed but undisclosed. It is estimated that just under half are for nature-based deals.

7 February 2023
Love0

What is additionality in the voluntary carbon market?

By News

A carbon market without additionality is like a square-wheeled bike; a highly scalable concept, scuppered by a fundamental flaw. This term, speaking to the very heart of the voluntary carbon market, it is essential to understand.

Additionality refers to the extent to which carbon credits represent a reduction or avoidance of CO2e emissions from a project that would not have been possible without the carbon finance generated through credit sales. It is an absolutely central principle as – if credits are not additional – they cannot be used to offset a corresponding tonne of CO2e emitted by the buyer.

While we focus here upon the additionality of supply, we cannot forget another foundational basis of carbon markets. That is, that high-quality supply must always be accompanied by high integrity demand. Corporate buyers need to have credible net zero strategies and prioritise cutting emissions in their own value chains as a first step. Only then should carbon credits be used to compensate for any residual emissions released whilst companies continue to decarbonise.

If you are thinking of investing, make sure to read our guidance for embarking on a credible pathway to net zero and resources from the VCMI while you explore our flagship portfolio projects.

Why is additionality so important?

It almost goes without saying that to be effective, carbon credits must represent a genuine reduction or avoidance of emissions. That is, as outlined above, the first criteria of additionality. That’s not all; the underlying activity from which the carbon credit was produced cannot have taken place without carbon revenue. 

But why is this so important? Well, take for instance this example: A wind farm is developed in, say China, and is connected to the grid. This is normally taken as a good thing. For one, it means low carbon energy and secondly it releases considerably less emissions than a coal power plant. But due to the costs of renewable energy coming down in many countries, wind farms in places like China are now cost competitive with fossil fuel energy. This means they can get built just using revenues earned from electricity sales. In essence, this means that this wind farm would not require the subsidy from the sale of a carbon credit to get built. As the project would have occurred anyway, no ‘additional’ emissions prevented from entering the atmosphere for which a corresponding volume of carbon credits can be generated.

Indeed, if a project could facilitate emission reduction or avoidance without the revenue generated from carbon credits, then to what extent is their sale necessary? Yes, carbon funding could be directed to people and communities on the frontlines of climate change to drive investment in resilience-enhancing infrastructure. But under a non-additional scenario, a project is not delivering any climate benefits beyond what was achievable without carbon revenue. Therefore, any company purchasing and retiring credits from such a project could not make claims of positive environmental action in good faith. So while the financing of social projects is extremely necessary, it should be done through the sale of additional carbon credits, or via a different mechanism entirely.

The idea of additionality is essential for any company to understand, both in terms of the scale of decarbonisation required by 2030 to meet 2050 targets and to protect against the reputational damage caused if claims are revealed as greenwash.

How is additionality regulated?

With a culture of meticulous scrutiny surrounding corporate green claims, it’s hardly surprising that companies err on the side of caution when it comes to the voluntary carbon market. Indeed, coupling this reputational risk with the urgent need for sustained, large-scale decarbonisation, buyers naturally want to know that the credits they invest in correspond to a genuine reduction or avoidance of emissions. Thanks to significant labours from across the voluntary carbon market, there are now numerous regulatory bodies to whom business leaders can turn. 

An expanding pool of companies and organisations exist with the purpose of distinguishing between high- and low-quality carbon credits. You may have come across the phrase, ‘Verified emission reductions (VERs)’. This refers to a reduction in CO2e from a project that is independently verified against a third-party certification standard. This type of verification is increasingly expected and enforced by both buyers and suppliers.

Yet, determining additionality isn’t as simple as classifying a project as additional or not. Sylvera, for instance, consider additionality as a metric of risk rather than a state that is, or is not, achieved. In fact, framed as a scale, additionality is the factor weighted most heavily in the calculation of Sylvera’s ratings. 

Others debate whether additionality is purely determined financially. While for some the wind farm example given above would be a perfect illustration of the concept, some would say that such an approach to additionality does not take into account any other factors that could have prevented the project from operating. This is known as ‘common practice additionality’ and refers to a scenario in which a project is economically viable without the sale of carbon credits, but there are other social or political factors that make it infeasible.

With stringent additionality regulation, we can unlock the full potential offered by high-quality, carbon credits. Indeed, if projects are additional they can deliver verifiable, impactful co-benefits for biodiversity, communities and individual livelihoods.

What’s next for additionality? 

Constantly evolving and improving, the standards of additionality look set to continue to rise across the voluntary carbon market throughout 2023. The Integrity Council for the Voluntary Carbon Market (ICVCM) is working on guidance regarding the setting and enforcing of a definitive global threshold standards for high-quality carbon credits. Known as the Core Carbon Principles, it is set for launch in Q1 2023.

Yet whatever developments arrive, conducting your own due diligence remains of fundamental importance. So when considering the purchase of carbon credits, consider if the project would have been financially viable without the carbon finance, ask if it is common-place in the local area and investigate if regulation exists to enforce or incentivise the project. These questions should help you determine additionality and decide whether the emissions reductions could have taken place without carbon finance. 

 

High-quality credits can create impact immediately. Used wisely, they serve to compensate for currently unavoidable emissions along a company’s pathway to net-zero. We work to ensure that high-quality, additional, independently verified products are available in the market. To see our flagship portfolio projects, make sure to check out the rest of our website.

31 January 2023
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