For carbon markets to be effective, a dedicated effort must be made by corporate buyers and project developers to align on a high standard of excellence. Companies exploring offsets should look for these three attributes of a project to feel confident they are purchasing high-quality carbon credits.
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?
How to identify and buy quality carbon offsets
The burgeoning voluntary carbon market has become a key component of many companies' emissions-mitigation plans; but the efficacy and validity of offsets varies wildly. Hear insights from South Pole on how companies can effectively navigate this landscape and support offset projects that truly benefit the planet — at SB'22 San Diego.
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.