While the majority of projects that generate carbon credits focus solely on carbon abatement, an increasing number also achieve other environmental, economic, social and cultural co-benefits — which increase impact ROI for companies.
The voluntary carbon market has continued growing rapidly because of demand from companies that have set net-zero targets. The recent explosion of pledges has led to record transaction volumes of around 104 million tonnes of carbon dioxide equivalent (MtCO2e) in 2019, an increase of 6 percent on the previous year. Jump to 2020 — and according to analysis by Ecosystem Marketplace, volume was still “surprisingly strong,” despite the impact of COVID-19 on sectors such as aviation and tourism.
In order to meet these ambitious goals, companies will need to employ carbon credits to offset their impact after they’ve exhausted energy efficiency and other reduction measures. As the voluntary market has matured, a range of carbon offsets and offsetting strategies have developed. Carbon credits not only play a role in a company’s mitigation strategy, they can also help companies maximize their impact through other “co-benefits” that some offset projects provide.
A number of recent developments have helped to bolster the appeal of the voluntary market for buying credits. The latest guidance published by the Science-Based Targets Initiative, which calls on companies to set rigorous carbon targets, included carbon offsets for the first time as part of a suggested net-zero strategy. Meanwhile, former Bank of England governor Mark Carney’s new global task force aims to scale up the market as quickly as possible.
“Taking action on carbon has become much more mainstream,” says Nick Aster, North American marketing director at South Pole, which develops and finances a range of carbon-reduction projects around the world. “There are always residual emissions that cannot be eliminated. Carbon credits aren’t new; what is, is the ability for companies to build a portfolio of credits that aligns with their overall business and sustainability strategy.
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“Even further, companies can collaborate with an organization like South Pole, to identify and build offset projects based on goals that are highly specific to an individual company’s unique operations and goals,” Aster said.
While the majority of projects that generate carbon credits — each equivalent to one tonne of carbon dioxide avoided or removed from the atmosphere — focus solely on carbon abatement, an increasing number also achieve other environmental, economic, social and cultural benefits. These are known as co-benefits, and they offer additional value to companies trying to meet their sustainability commitments. Project developers such as South Pole are increasingly looking to offer co-benefits beyond carbon offsetting, as projects are conceived.
Take Kariba, in Zimbabwe, as an example of how a carbon credit-generating project not only saves forests, but also protects wildlife and changes the lives of local people.
Due to political and economic unrest, desperate Zimbabwe communities have moved deeper into forests, clearing trees for farming and fuelwood. More than 10 percent of the country’s forests were lost between 2001 and 2018, according to data from Mongabay.
The Kariba project is designed to protect the trees that remain while also giving local people the skills and resources they need, so that they don’t have to rely on the felling of trees to survive. The sale of carbon credits is helping to pay for a range of activities that boost the independence and wellbeing of communities across the Binga, Nyaminyami, Hurungwe and Mbire districts in the north of the country. Improved health clinics provide better healthcare and infrastructure, including new roads and boreholes. Meanwhile, training in conservation farming, community gardens, beekeeping, fire management, and ecotourism is creating jobs to give people more sustainable incomes.
The Kariba project is also one of the biggest REDD+ projects in the world — protecting 785,000 hectares of forest while creating a wildlife corridor on the Zimbabwe-Zambia border for vulnerable and endangered species, such as the African elephant and lions.
In 2020, the project prevented 3.62 MtCO2e from entering the atmosphere. Even more tangible co-benefits of the project were felt last April, as COVID-19 hit the country. To support government efforts, the project joined forces with the NGO Miracle Missions to provide sanitizers, gloves, masks and other medical supplies to under-prepared health clinics.
Meanwhile, local communities have generated US$249,000 by selling moringa trees and community-garden produce. Roughly US$57,000 has flowed into local health clinics and schools, 37,000 more people now have access to safe drinking water, and 22 permanent jobs have been created thanks to the project.
In Colombia, South Pole’s Predio Putumayo project is similarly ambitious. In what is one of the best-preserved areas of continuous forest in the region, deforestation is on the rise as a result of increased farming, mining and illegal logging.
Working with almost 9,000 people across 55 communities, a community-led program is making use of REDD+ funds to support forest preservation. Today, 3.6 million hectares is being protected through the proactive efforts of local people, including indigenous communities, saving 2.5 MtCO2e per year.
In Honduras, South Pole’s Muskitia Blue Carbon project is a first of its kind. It is helping to protect mangroves, which can store up to four times more carbon than terrestrial forests. By collaborating with eight indigenous and Afro-Honduran communities, the project is encouraging people to work together — to come up with ideas to protect the local environment for the long term, for the benefit of everybody.
Almost 5,000 hectares of mangrove forest is being protected by the project, saving 62,500 tCO2e per year. But the social benefits are huge, too — with indigenous women and young people given training to help them set up new business ventures in cocoa production, beekeeping or fishing, for example.
“The social aspects of carbon-credit projects are often overlooked, despite their obvious additional value. It may be simpler and cheaper to support carbon-abatement initiatives, such as capturing methane from a landfill,” Aster says.
The market for pure-play carbon credits is more established, too; and co-benefit projects, however valuable, are often more subjective in terms of their wealth: “There’s nothing wrong with supporting simple projects, but for companies looking to maximize their impact, there are more comprehensive strategies.”
Quantifying the true value and impact of co-benefits is getting easier, he adds. It is possible to record the number of jobs that have been created in a forest-protection project, for example. And you can measure the hours saved when a family doesn’t have to walk three miles to get firewood. “But other environmental benefits — such as impacts on biodiversity — are now being quantified, too; with a biodiversity credits market emerging in Colombia, Australia, and elsewhere,” Aster says.
It is a trend likely to continue, with the growing corporate market looking to achieve additional and more holistic sustainability benefits.
South Pole’s business has been robust during the pandemic. Aster says some companies have cut back on their ambition, but few have fundamentally changed their commitments: “Historically, sustainability efforts have been very much tied to a strong economy. But COVID-19 has not changed climate ambitions one bit, which is great news.