The integrity of the voluntary carbon market (VCM) has been called into
question
in recent years as awareness has grown of the prevalence of low-quality carbon
offsets.
And while many companies are
uncertain
about how to properly vet projects, offsets still play a central role in most
corporate sustainability plans. So, how can buyers and sellers of carbon credits
ensure the projects they choose will have the desired impacts and climate
outcomes?
A June 26
webinar
hosted by Sustainable Brands® discussed the importance of community
relationships in ensuring high-quality offset projects. Panelist Annie
Guo heads up
Microsoft’s nature-based solutions
initiatives aimed at making the tech giant carbon-negative by
2030.
Large companies such as Microsoft, she said, can use their outsized purchasing
power to boost credibility and demand for truly impactful nature-based climate
solutions. Offset projects, she added, should be aligned with an organization’s
values as well as their decarbonization goals, and complement real reduction
strategies within its supply chains.
Quantitative data is essential for any robust carbon
credit;
yet, many data gaps exist in offset projects (specifically, nature-based
solutions
such as reforestation, biodiversity
conservation
or regenerative
agriculture)
that shake buyer confidence. The myriad of social and environmental benefits of
planting
trees
and other nature-based interventions must become quantifiable assets that
companies can easily use in decision-making.
“How do we turn a pretty old approach such as tree planting into a
sophisticated, scaled, securitizable asset?” Guo asked. “We’re going to invest
across our entire supply chain to make sure the materials we need and the kinds
of energy services we need, come into existence at the scale in which we need
them.”
Matt Evans founded an organization to
help low-income communities in the Global South suffering from energy poverty
and chronic underinvestment from carbon-offset developers.
UpEnergy replaces highly polluting,
conventional
cookstoves
— which kill 3.8 million
people
each year — with clean alternatives, and uses the associated avoided emissions
to generate offsets. Scopes 2 and 3 emissions are an untapped source of climate
mitigation; and smaller, community-scale interventions represent massive
potential for mitigation and offset generation, Evans explained.
“[Carbon offsetting] has a really interesting opportunity to abate emissions,”
he said, “but also tremendous benefits for the end users of the products that we
distribute.”
A common theme throughout the discussion was delivering impact beyond carbon
reduction, and the ability to communicate an asset’s long-term social and
environmental
benefits
with certainty.
“Is this benefit core to the durability of the project?” Guo asked. “I’m looking
for whether the claim [about] other social benefits is material to supporting
the longevity of that project.”
For Guo, durability is determined across four pillars: Do no harm, promote
social wellbeing and environmental justice, establish a reasonable baseline, and
guarantee that the project is doing the work it’s claiming to do.
“There’s got to be some assurance of durability,” she said. “I think this is
where the industry falls short sometimes.”
The VCM’s rapid growth has sometimes been at the expense of due diligence,
resulting in a proliferation of low-quality
projects
in the market. Guo highlighted the importance of understanding how the fine
print and mechanics of carbon-offset agreements will pan out in the real world.
Microsoft achieves this with robust internal due diligence that often exceeds
existing market standards, which Guo said promotes transparency and credibility.
“I’ve [personally] dug into reading carbon-purchase contracts to identify ways
they can be restructured with durability in mind,” she said. “We need these
projects to be bankable. I want to be able to turn these projects into an asset
that can be securitized.”
Erin Horleman, VP of
Commercial Strategy at Carbon Streaming,
agreed that offset buyers are typically motivated by mandatory reporting
requirements from within their organizations. Buyers usually look to invest in
projects that tie to their supply chain or ethos, so they often promise to
purchase a certain quantity of credits to ensure long-term security — a practice
called “credit
offtake.”
Carbon Streaming invests in high-integrity climate project developments to
provide carbon-credit buyers with a portfolio of high-impact, low-risk reduction
and removal credits. The company gives buyers access to a supply of rigorously
vetted carbon credits, along with detailed impact reporting and opportunities
for long-term partnerships tailored to meet their sustainability objectives.
Connecting buyers with projects is central to Carbon Streaming’s strategy, a
role Horleman believes deepens durability and transparency. Her company relies
on local experts to build relationships with the
communities
impacted by offset projects to ensure buy-in across the carbon-credit value
chain.
“We’re a public company, so we have a vested interest in the long-term success
of the project,” she said. “The ability to meet with the people on the ground
that are part of project implementation goes so far in terms of due diligence.”
The panel concluded with a variety of key considerations for potential offset
buyers to keep in mind when choosing projects.
Getting close to a project is not only good for identifying co-benefits and
securing community support, but for identifying potential pitfalls in contract
language or project design that may threaten the project’s effectiveness or
durability.
“It’s really hard to get answers to those kinds of questions when you’re too far
removed from the project,” Guo stated.
Evans emphasized that UpEnergy’s projects are led by the communities and end
users of their products. Regardless of project type, when generating offsets, he
explained, “… it’s still equally important to think about what we are doing to
the state of technology and the common practices in the places where we work
over time, and really think about durable change and the decarbonization of
entire sectors.”
Evans hopes to see more investment in avoided emissions rather than solely
relying on technologies such as direct air
capture
to remove in the future what can be avoided now. Guo said due diligence and
governance — either voluntarily or through regulations — will help bolster the
efficacy of emissions-offset projects.
Horleman pointed out that offset buyers often have higher standards than
certifiers; so, while it’s essential to keep tabs on the pulse of the regulatory
environment, “we have to listen to our clients and what things are important to
them.”
Evans added that many crediting agencies aren’t experts in the projects they
certify, so UpEnergy often has to educate agencies on how projects work in the
community.
Guo offered that thinking of carbon offsets as a real estate transaction can
help make buyers and sellers more likely to consider the long term and connect
with the deeper meaning of projects. She advised potential buyers to communicate
their values and expectations to all involved parties and pre-negotiate prices
“to come up with a framework on what you’d be willing to buy, so that you can
move fast.”
“We’re working with our buyers to make sure that those projects aren’t going to
disappear,” Horleman said. “We want our buyers to be able to engage with the
same project and watch it progress and grow and expand, and to see the
co-benefits only get bigger and better.”
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Christian is a writer, photographer, filmmaker, and outdoor junkie obsessed with the intersectionality between people and planet. He partners with brands and organizations with social and environmental impact at their core, assisting them in telling stories that change the world.
Published Aug 6, 2024 8am EDT / 5am PDT / 1pm BST / 2pm CEST