Assessing the quality of a carbon offset project
Introduction
The quality of a carbon offset project is crucial for buyers of the carbon credits it generates. High-quality projects can command higher prices for their carbon credits.
In recent years, carbon credits have been scrutinized for their underlying project quality and impact on emission reductions.
A nine-month investigation by the Guardian and other journalism organisations revealed that more than 90% of rainforest carbon offsets (REDD+ projects) by Verra do not represent genuine carbon reductions and could make global heating worse. Out of 87 Verra approved active projects, two groups of scientists (one internationally based and the other from Cambridge in the UK) found that only 29 of them had enough information for further scrutiny. Of the 29 projects, the investigation found that only 8 showed evidence of meaningful deforestation reductions. Credits from 21 projects had no climate benefit, 7 had between 98% and 52% fewer than claimed using Verra’s system, and 1 had 80% more impact.
This post highlights key elements to look out for when assessing the quality of a carbon offset project.
1) Additionality
A carbon project is additional if the emissions reductions or removals would not have occurred without revenue from the sale of carbon credits. The project must demonstrate that its climate benefits are truly additional to what would have happened under a baseline (“business-as-usual”) scenario. Determining additionality requires an assessment against a counterfactual, that is, what would have happened in the absence of the crediting mechanism.
A project should prove that it relies on funding from carbon credits to be financially viable. If the project would have been implemented regardless of this funding (e.g., due to government subsidies or profitability), it fails the additionality test.
Without additionality, carbon offset programs risk issuing credits for actions that would have happened anyway, leading to “non-additional” reductions, which undermines the integrity of the offset and may result in no real climate benefit.
Credits with additionality risks are a huge financial risk. They cannot be used in a credible offsetting strategy and ultimately the credits will lose their value on the market. These projects can also leave an organization vulnerable to greenwashing claims by NGOs and the media.
In this article, Sylvera highlight a few red flags that organisations need to look out for while assessing the additionality of projects.
The World Bank’s guide to developing domestic carbon crediting mechanisms outlines some tests that can be used to demonstrate additionality.
2) Overestimation
A high quality carbon offset project provides an accurate measurement of the carbon removed or reduced without exaggerating.
Since reductions in particular are determined in comparison to a baseline scenario, the project needs an emissions baseline calculation to compare the reductions or removals against and refer to. Emission calculations provide details on how many tons of emissions would have occurred if it wasn’t for the project.
There has been a myriad of criticisms against some carbon offset projects that are alleged to have overestimated their emissions reductions.
In most parts of developing countries, traditional cooking methods rely on inefficient biomass burning, such as wood and charcoal. These methods contribute significantly to carbon emissions and indoor air pollution. Improved cookstove technologies address these issues by increasing efficiency and reducing fuel consumption, leading to fewer greenhouse gas emissions.
Efficient cookstove projects reduce emissions to the extent that users i) adopt a more efficient project stove defined as the percentage of distributed stoves actually in use; ii) use the project stove, where ‘usage’ is defined as the percentage of meals cooked using the project stove; and iii) stop or reduce ‘stacking’, defined as the percentage of meals cooked using the baseline stove(s). These rates are used to determine the change between pre- and post-project fuel use.
Gill-Wiehl et al. (2023) conducted a comprehensive, quantitative, quality assessment of offsets by comparing five cookstove methodologies with published literature, and their own analysis. Their assessment found flaws in how carbon credits were generated. One of the surveys they sampled simply asked households if they used the improved stove in the last week or month. Credits were generated for all households that replied ‘yes’ as if they used the stove 100% of the time for the entire 1–2 year crediting period. Additionally, they found that none of the surveys they reviewed was designed to avoid social desirability bias or recall bias. Social desirability bias occurs when participants provide responses (for example, inflating adoption/usage), which they believe the surveyors (hired by the cookstove project developer) want to hear. Recall bias occurs when respondents may struggle remembering stove usage over the past year.
3) Permanence
Permanence ensures that the carbon dioxide sequestered (removed) remains sequestered and is not released back into the atmosphere.
Most removals projects have a timeframe of “permanence” so a full guarantee of permanence is scientifically impossible. Carbon dioxide has a half-life of over 100 years, so projects that secure emissions for only a few decades may not permanently and sufficiently reduce emissions.
For example in an ARR carbon offset project, cutting down trees or burning forests would reverse the benefits of the project by emitting the carbon dioxide previously absorbed back into the atmosphere.
4) Exclusivity
Exclusivity prevents double counting of the removal or reduction credit. For a carbon credit to be valid, the removals or reductions need to be attributed to a single entity and the credits from each project are claimed once and forever.
Once credits are purchased, the project must be retired from the registry with a stated purpose promptly after an entity claims it. This is a permanent action. A credit cannot be passed on to someone else, even if the original buyer wants to give up the credit.
In Kenya, the primary buyers of VCM credits have been corporations such as Air France-KLM, Apple, BHP, Delta Air Lines, Kering, Nedbank, Nespresso, Netflix, Shell, and Zenlen Inc. Since 2011, Kenya has issued over 59 metric tons of carbon credits to various projects. Eighty three percent of these credits come from voluntary markets. Most of the voluntary carbon credits issued in Kenya stem from nature-based projects.
To avoid double counting, only the buyers of these carbon credits should claim them. The government of Kenya can not use the credits or the projects to count towards their NCDs.
5) Leakage
Leakages occurs when some effects of an offset occur outside the project’s carbon accounting boundary e.g. an action causing emissions reductions in one place may also cause increases elsewhere.
For example, in an ARR carbon offset project, trees are planted to absorb carbon dioxide and generate carbon credits. In this case, leakage would happen if local farmers or loggers shift their activities to another nearby area not covered by the project. The carbon reductions achieved by the project are partly or fully offset by increased emissions in another area, which is outside the scope of the project’s carbon accounting boundary.
6) Social & environmental harm
A carbon offset project must comply with local laws and not cause any damage to the local community and ecosystem.
Carbon offset projects should actually provide benefits to the local community and ecosystem, beyond emission reductions. These additional benefits are referred to as co-benefits. Co-benefits, can increase the demand for and the price of a project’s carbon credits .