Recent demand for carbon
credits
has catapulted to unprecedented levels. For the first time ever, annual sales in
the voluntary carbon market exceeded $1
billion
in calendar year 2021 according to Ecosystem Marketplace — which has been
tracking activity for the past 16 years. Furthermore, researchers at
Bloomberg are already predicting carbon offset prices will increase
fifty-fold by
2050.
This demand showcases the incredible role that natural climate solutions can
play in a company’s portfolio of net-zero strategies. Once a company has taken
all available steps to reduce emissions as part of its comprehensive abatement
strategy,
carbon credits can help a company neutralize the emissions they cannot
eliminate.
However, this rising demand has also spurred an onslaught of carbon credit
options in a marketplace that is still evolving
towards a standardized
framework
— overwhelming buyers with questions and concerns around credibility and
quality.
Do these credits represent real, additional reductions in the concentration of CO2 in the atmosphere?
What type of risk is my company taking by partnering with this carbon project?
How do we ensure this investment today is a long-term success?
For carbon markets to be effective and for carbon credits to continue being a
viable option for companies, a diligent and dedicated effort must be made from
all stakeholders — particularly corporate buyers and project developers — to
align on a high standard of excellence. This will ensure long-term success for
the marketplace, reduce risk for carbon buyers and deliver a meaningful benefit
to the planet.
Companies that are exploring offsets should look for these three attributes of a
carbon project to feel confident they are purchasing high-quality carbon
credits:
Transparent and accurate additionality
Carbon accounting is complex, and companies should invest the time in
understanding a project’s method for calculating additionality. In order to use
a carbon credit to compensate for or neutralize the emissions arising from
business operations, the credit must provide an ‘additional’ carbon benefit
above and beyond business as usual for it to authentically meet a company’s
net-zero needs.
Proving additionality can only be determined with a credible and legitimate
baseline. If high integrity is not employed at this initial level, over- or
under-crediting can occur. Most projects today use a projected baseline,
inferring the additional carbon that is attributed to the project against an
informed, yet hypothetical, scenario baseline. Other projects are bringing the
latest science together with innovative business models to advance their accounting. For example, we at the American Forest Foundation and our partner, The Nature Conservancy, have pioneered
the use of a dynamic baseline for our project, the Family Forest Carbon
Program
— which engages small, family-owned
forests
in carbon sequestration and storage. A dynamic baseline compares the carbon
sequestered on lands enrolled in our program to highly similar forests that are
not enrolled. By measuring the difference between these forests over time, the
program pinpoints the real carbon benefit of the program in an accurate and
transparent way. This new carbon-accounting methodology is soon to be approved
by Verra’s Verified Carbon Standard,
giving companies an extremely credible claim of additionality.
Durability of the carbon benefit
The next step to ensuring the validity of carbon credits is to see if they stand
the test of time. This is called permanence — a critical attribute of a true
carbon benefit because it gets at the root of a meaningful impact in fighting
climate change: Emissions that are removed or reduced need to be permanently
removed or reduced in order to neutralize residual emissions for a company.
Companies should opt to partner with carbon programs that are providing
confidence and verification of permanence through alignment with a standards
body and a dedicated plan to long-term monitoring and engagement of the
properties involved.
Robust and quality program design
Carbon projects should be more than transactional interactions between project
communities, developers and carbon buyers. Rather, carbon markets should ignite
engagement — which is a critical shift towards long-term impact. For example,
owners of small forest parcels care about their land and want their trees to be
healthy and productive for the future. But most lack the technical expertise, in
addition to the funds, needed to implement sustainable practices that increase
carbon sequestration and storage. Access to carbon markets solves the cost
challenges for small forest owners; but pairing it with continued education and
guidance helps shift the landowners’ long-term relationship with their land.
This deeper engagement with on-the-ground stakeholders provides companies with
greater confidence in the project’s values and motives, and helps avoid
concerns about
greenwashing.
Taking the time to do thorough due diligence on the quality of carbon credits
may feel daunting; but the rewards are worth the effort for companies, for
landowners and for the planet.
If you are interested in digging deeper into the attributes of a high-quality
carbon credit, check out this series from the American Forest
Foundation.
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American Forest Foundation
Published Mar 23, 2022 8am EDT / 5am PDT / 12pm GMT / 1pm CET