5. If a nonprofit had purchased forested land in the past, could they sell offsets from that conservation project now? What is additionality?
Additionality is one of the most important criteria in offsetting. It’s a term used to describe the fact that the GHG reductions generated through an offset project would not have happened anyway. If the associated GHG reductions are not additional, then purchasing offset credits in lieu of reducing your own emissions would increase overall emissions, making climate change worse. One way to see if a project meets the additionality criteria is to compare it to a scenario where there is no revenue from the sale of carbon offsets. A developer, such as a nonprofit that owns land, must provide sufficient evidence that the project would not be possible without the support of carbon finance. Similarly, for afforestation initiatives, the developer would have to prove that trees weren’t cut down on the project area prior to implementation just to benefit from carbon finance.
6. If a company purchases carbon credits that save 5,000 acres of forest this year, what happens next year? Retiring carbon credits.
A company emits every year, so achieving carbon neutrality depends on reducing first and then using carbon offsets to address any residual emissions. We only work with carbon offset projects that are certified to the strictest standards to ensure environmental integrity and impact, and we only sell offsets for emissions reductions that have already happened. In this scenario of a company purchasing offset credits for 5,000 acres of forest this year, those credits would be retired and cannot ever be used again. To offset emissions next year, the company would need to purchase newly issued credits (e.g., from additional carbon stored in forest growth or project expansion), or select credits issued by another offset project.
7. Does that mean the land remains conserved even after the credit is retired?
Yes, the project area remains the same unless it is expanded, or the biomass increases. For example, it could be a standing forest, but further growth and regeneration means more carbon is sequestered. The project developer uses the finance from the sale of the carbon credits to continue operating the project and maintain the trees that have been planted.
8. How can you confirm that the carbon removal represented by a carbon credit remains removed? What is permanence?
Nature-based projects are set up with a crediting period that can range between 20-60 years, depending on the certification body and project type. During this timeframe, biomass growth is monitored, stored carbon is calculated and verified, and carbon credits are then issued. High-quality certification standards have established rigorous criteria and mechanisms to verify the integrity and permanence of carbon offsets that are produced. Risk mitigations must be in place to protect against biomass storage loss. These can include requirements for risk assessments during the design phase, risk buffers where a percentage of credits are not sold, and frequent monitoring. Risk buffers provide insurance against any GHG reduction reversals – if reversal occurs, buffer credits are retired on behalf of the project’s buyers. Precise monitoring systems also help ensure that offset projects provide the highest quality additional and permanent emissions reductions available in carbon offset markets.
9. Who develops carbon offset projects? Are they usually implemented by nonprofits or other organizations?
Offsetting projects can be developed by nonprofits, non-governmental organizations (NGOs), or private entities. The most important thing is ensuring the projects are certified under benchmark standards. Two of the leading standards in the voluntary carbon market are the Gold Standard and VCS. They are backed by environmental and business experts and organizations who came together to establish greater quality assurance in carbon markets. There are a few other standards that have good projects such as the American Carbon Registry in the U.S. and Plan Vivo, but we tend to work with The Gold Standard and VCS to ensure that all quality criteria are met.
10. What are the characteristics of a high-quality carbon offset project?
We’ve already covered some of these, but high-quality carbon offset projects typically demonstrate the following characteristics:
- No double counting: The project is only operating under the voluntary carbon market and cannot be counted in compliance markets.
- Additionality: The project would not have otherwise happened without carbon finance.
- Scientific methodologies: Scientists are on-site to make sure the project is implemented correctly. For example, afforestation projects should plant native trees and have diversity in the trees being planted. Emissions reductions should also be calculated based on scientifically proven methodologies.
- Risk assessment and risk buffer: A risk assessment is included as part of the project design documentation and needs to assess all potential risks over the lifetime of the project and beyond. For example, will climate change cause wildfires, or could political instability prevent project monitoring in the future? In cases of high risk, the standard won’t approve the project. In cases of low risk, the project will still need to set aside some of the emissions reduction credits to not be sold as a risk buffer.
- Permanence: How long will the carbon removal from one offset be in place? This accounts for questions like land ownership, risk of natural disasters, etc.
- No negative impact: The project has not and will not cause adverse impacts to the local environment or community. Nature-based projects must also provide evidence that the project aligns with the Climate, Community, and Biodiversity Standards (CCBS).
- Minimal leakage: Implementing the project won’t cause emissions-producing activities to “leak” or shift elsewhere. For example, a forest conservation project leading to deforestation in another area.
- Baseline and annual monitoring: The project should be monitored annually to verify the carbon reductions produced compared to the baseline. The baseline is an estimate of how much carbon would have been removed without the project being implemented.
- Third party verification: The initial implementation and follow-up monitoring is verified by independent third parties.
11. Do you have a favorite story where you’ve seen a carbon offset project make a real difference?
One of my personal favorites is the Borneo Rainforest REDD+ Project. Borneo has seen significant deforestation from palm oil plantations, which have also had devastating impacts on biodiversity and soil degradation. This project is saving nearly 65,000 hectares of carbon-rich peat swamp forests from being converted into palm oil plantations. It is also providing a wildlife reserve for endangered species like the orangutan. Over and above the climate and conservation benefits, it’s quite touching to work directly with the project developers and see the difference they are making on the ground. This is our best-selling project which several of our clients are supporting as part of their climate neutrality strategies: Penta, Media and Games Invest (MGI), Exasol, Speedinvest, home24, to name a few.