Big Firms Make their own Carbon Credits – GSK, Volkswagen, Total

/in /by

A number of large corporations decided to fund their own projects that generate carbon credits despite criticisms against offsets. 

GSK, Volkswagen and Total are just some of the corporate firms that continue to lean on carbon credits to offset carbon emissions.

Corporate Carbon Offsetting

One of the world’s leading pharma companies, GSK Plc, believes that carbon offsets are a crucial tool that moves capital needed for health, nature, and climate. As per the company’s director of sustainability partnerships and strategy, Adele Cheli:

“Just because it’s [carbon offsetting] not perfect doesn’t mean we’re going to step out. We’re going to lean in and make it better.”

Corporate carbon offsetting means a polluting company buys a carbon credit to make up for the carbon it emits. Existing carbon offsetting schemes are under pressure due to the poor quality of some offset projects. 

Moreover, carbon offsets are exploited in developing countries where most projects operate. This puts large companies’ offsetting schemes under scrutiny by environmentalists and investors.

Some groups think that heavy reliance on carbon offsets led to corporate greenwashing. Others believe that it can discourage companies from directly cutting their carbon footprint.

Overall, there’s a consensus in the sector to ensure that corporate offsets don’t replace or delay urgent actions to decarbonize. 

Large firms such as GSK and Volkswagen admitted that they’re aware of the need to prioritize emission reductions over offsetting. Many big corporations also agree like Total, Shell, Barclays, Chevron, Bayer AG, among others. 

If done right, corporate carbon offsetting can rapidly professionalize the voluntary carbon market and further drive its growth. 

The Taskforce for Scaling Voluntary Carbon Markets (TSVCM) survey indicated that market size in 2030 can grow into ~$50 billion at the high end of estimates. That means about 200x growth for the carbon offset market within a decade as the chart shows.

An industry expert once said that companies with their own offsetting projects can manage the impact and quality of their offsets better than buying from carbon credit brokers. 

In-house Carbon Credit Generation

Pharmaceutical: GSK

The London-based pharma thinks that homegrown carbon credits can offset any emissions it can’t get rid of. GSK aims to be carbon neutral by 2030 while planning to use offsets until at least 2045. 

About 50% of its carbon emissions is from the firm’s asthma inhaler products. 

The drug maker plans to directly reduce 80% of its own carbon footprint by the end of the decade. This includes emissions from its supply chain and customers. The remaining 20% will be abated through carbon offsets, specifically by investing in mangroves. 

GSK has been leaning on the carbon capture power of mangroves in the coastal areas of Indonesia. The company is supporting the mangrove project in exchange for the carbon the coastal trees are capturing. 

Mangroves are known to sequester up to 50x more carbon than tropical forest trees. Unfortunately, this natural carbon sink is under threat to disappear. In Asia, Indonesia is one of the countries that is hardly hit and GSK is offering financial help.

The pharma company partners with First Climate, a carbon project developer in its mangrove project in Java seeking to restore mangroves in 2,500+ hectares. In exchange for its funding support, GSK expects to generate up to 140,000 carbon credits every year from the project. 

The company even plans to produce as much as 2 million carbon credits each year for its own offsetting purposes. It has more upcoming projects to get all the credits it requires beyond this decade. 

The company then seeks to opt for carbon removal credits for its 2030 climate goals while preferring it for its 2045 targets. 

Automotive: Volkswagen

The German carmaker, Volkswagen, has an even more ambitious goal than GSK – generate 40 million credits each year by 2030. That’s understandable though because the automaker emits around 30x more carbon than the drug maker. 

That goal makes up about 25% of the amount of offsets that global companies bought and retired last year. Bloomberg reported it to be at 155 million.

Volkswagen AG seeks to reach net zero emissions by 2050. It partnered with a local carbon project developer to develop its own carbon credit generating venture “Volkswagen ClimatePartner GmbH”. 

The goal of the program is to offset emissions from the carmaker’s electric vehicle production supply chains in Europe. It has 8 projects underway which includes forests and savanna protection. The venture’s director said that they expect to generate the first carbon credits by 2025. 

Oil and Gas: TotalEnergies

A representative from the big oil and gas industry, TotalEnergies, can’t agree more with the German automaker. The energy firm’s former executive of nature-based climate solutions said that investing in offset projects now is a good start. It can produce good credits in 5 years time. 

Total SE aims to support nature-based projects with $100 million each year. It is meant to have its own natural carbon sinks that can suck in a total of 5 to 10 million tons of carbon each year starting in 2030. 

The oil giant is investing in projects that protect forests, regenerative agriculture, and wetlands. Also part of its 2050 net zero targets, Total will reduce its petroleum products and increase natural gas and renewable electricity. 

BP Plc has a majority stake in Total and helps ramp up its carbon credit generation efforts. 

Other corporates are also turning their attention and money to carbon credit projects that can offset their huge carbon footprint. Shell, Chevron, Barclays, and Bayer AG are some examples. They are investing millions of dollars in nature-based climate solutions such as reforestation, mangrove restoration, and regenerative agriculture. 

The post Big Firms Make their own Carbon Credits – GSK, Volkswagen, Total appeared first on Carbon Credits.

Carbon Credit Brokers: What They Are and How They Work

/in /by

Are you a bit wary of investing in carbon credits and want to enlist help from a broker? Or perhaps you only want to learn what brokers do and what is their role in generating carbon credits. 

Either way, this article will help you know everything you need about carbon brokers. And while most of them can be trusted, it never hurts to do your research first. 

What is a Carbon Credit Broker?

A carbon credit broker is tasked with providing investment access to commodity markets. Apart from carbon credits, this can also include other commodity products such as renewable energy credits and sustainable funds. 

So in a sense, carbon credit brokers function in a similar way to traditional brokerage platforms. They simply facilitate the transactions between the investors and their desired market.

But carbon credits work in a highly fragmented space without centralized exchanges as the case with other long-standing stocks.

On the other hand, even the best carbon credit brokers only offer access to the over-the-counter markets. 

In other words, they work as a middleman between carbon market participants looking to participate in the space – the buyers and sellers.

Buying and selling carbon credits via OTC can be risky, especially for those who don’t have enough experience or expertise in the field. For instance, with the growing demand for carbon credits but a lack of centralized exchange, investors will often have to pay a huge premium to buy carbon credits through OTC markets.

Also, when it comes to prices it depends on market conditions at the time of carbon trading and whether the ball is in the buyers’ or the sellers’ court.

This is where the knowledge and skills of carbon credit brokers would come in to help you. Credible brokers can lead you to the right projects that generate high-quality carbon credits. This is critical to avoid falling victim to carbon credit scammers. You can lose hundreds, if not thousands, of dollars if you’re not guided. 

Not to mention that brokers are also in the know who are the top carbon trading companies to work with that can maximize your investment. 

Whether you’re looking to offset your carbon footprint or simply want to support projects that fight climate change, the broker will guide you to find the best choice. 

How Do Carbon Trading Companies Work?

Carbon trading has been successful in reducing greenhouse gas emissions, which is key to tackling climate change. Still, it is also important to note that there are some uncertainties involved in trading carbon credits. 

But the top carbon credit trading companies know their way around that. Popular names include AirCarbon Exchange, Carbon Trade Exchange, Toucan Protocol, and Xpansiv. 

They are businesses that carry out the buying and selling of carbon credits. They offer credits that can be bought, sold, or traded as part of a carbon offsetting project. 

The buyers can use the credits to offset their footprint.  

The basic idea behind carbon trading is to create a market-based mechanism to encourage companies and individuals to cut down their emissions by making it financially beneficial to do so. 

The first step involved in carbon trading is to do an emissions inventory by calculating how much GHG the entity emits. Once the amount is known, the polluter can now buy carbon credits from a carbon trading company. Each credit represents a reduction of one metric ton of CO2 or its equivalent. 

But before the credits are issued, carbon trading companies usually do verification first. It is to verify and ensure that the carbon credits traded are credible and represent real carbon reductions. 

After verification, carbon trading companies can then trade the credits on their platform where buyers and sellers trade. The price for the credits vary, depending on the market type and the underlying regulations.

The proceeds from selling carbon credits are used for various purposes. Most of the money goes to investing or supporting carbon reduction projects such as reforestation, upgrading energy efficient projects, or funding climate mitigation initiatives. 

With that, carbon trading companies play a crucial role in transitioning to a low-carbon economy through market-based incentives to reduce emissions.

So, where do brokers of carbon credits come in? 

They connect the buyers and sellers of carbon credits…but for a fee. 

How much is the Brokers’ Fee?

That fee they charge is reasonable though. They have gone through a process before they were approved as brokers. 

They have waited some time before they have started selling carbon credits. And even before that, they have to make some decisions as to what type of projects they will pick to offer the buyers. 

They will do all the things for you so that you just have to decide which project to support. After all, that’s how they earn – getting the share from a certain percentage of their share in the sale proceeds. 

Not all carbon credit brokers have the same rate or percentage share. Some may charge for as low as 5% while others do so in the range of 10-20%. The difference varies depending on the broker’s expertise, the specific project, and other things. 

The Brokers’ Role in Creating Carbon Credits

Investments in the carbon credit market had soared as carbon prices increased faster, leading to more carbon reductions and removals. It is the case with the EU and California carbon credits or allowances prices in 2021. Brokers play a key role in this space. 

Brokers aid in getting carbon offset projects off the ground through funding and marketing services. These projects can be costly and often take a long time to process. 

A broker’s job is to address those issues by helping project developers (often the sellers) and buyers alike. As some developers would say that brokers are critical, especially at the times when demand and prices are low.

In other words, a broker’s role is to make the project attractive to a buyer or a reseller.

Some carbon credit brokers are even taking huge risks to develop those projects. For example, they shoulder the upfront prices for the carbon credits. 

A group of brokers said that bulk of the proceeds from selling carbon credits goes back to developing more projects. Other revenue chunks are for paying other costs such as administration, marketing, and project monitoring, reporting and verification (MRV).

How Does Buying and Selling Carbon Credits Work?

The concept of buying and selling carbon credits is anchored at the fact that companies are required to emit only a certain amount of greenhouse gases. 

They have to follow that limit to avoid fines, or they can turn to carbon credits for their unavoidable emissions. This trading happens in the compliance or regulated carbon markets.

Take for instance the case of Tesla. The carmaker specializes in producing electric vehicles and clean energy sources. It only means that Tesla has surplus carbon credits on its books, which gives it big revenue through selling those excess credits to other businesses. 

To be exact, the EV maker made a record $1.78 billion sales from carbon credits in 2022 alone. 

But for smaller companies and individuals, things can get tricky because there’s currently no centralized exchange process that can facilitate buyers and sellers. 

That means for the average retail investor, OTC carbon trading may not be the best option. Instead, they might consider other ways but the most common means is through carbon credit brokers.  

If you are a producer of carbon credits, you can sell them yourself. But prepare to exert a lot of effort and spend more time if you want to. Or save them by enlisting a broker. 

The same goes if you are a buyer. You need to do a lot of research before you can trust the carbon credit trading company or platform. 

Finding the Best Carbon Credit Trading Platform

As discussed earlier, carbon trading companies are essential to reduce planet warming emissions. They facilitate the buying and selling of carbon credits. 

There are many different carbon credit trading platforms available to choose from. Though they have unique features, they share one thing in common: they help drive investments into projects that benefit the environment.

Finding the best trading platform to take part in is no easy feat. The first thing to do is to figure out what kind of projects to invest in or support. 

So, for instance, if you prefer to invest in renewable energy projects, it would be better if you pick a company that trades renewable energy credits. It is one among the over one hundred types of carbon credits in the market.

If you are looking for a way to enter the world of carbon credits without the need to wade through all the web of details yourself, one place to start is the online brokerage. These trading platforms provide access to various types of carbon credit investment vehicles such as ETFs or exchange-traded funds.

Through these platforms, you can also choose between different carbon credit futures contracts, depending on what you prefer and the level of investment risk you can take.

Should you want to learn more about carbon credits, here’s our complete guide about it.

Investing in Carbon Credits through a Broker

Investing in carbon credits is one of the best ways to cut your carbon footprint while contributing to the fight against climate change. 

It’s not surprising, therefore, that many countries are now making policies around carbon credits. The UK, EU, US, as well as China are the major country players. They strongly support the growth of carbon markets.

So by investing in the right carbon credits, you’ll be satisfied that your money goes towards projects that help reduce carbon pollution.

But it is important to understand the market well if you want to invest in carbon credits. For one, it helps to know the different carbon credit trading options currently available. Picking the right one to suit your situation will give you the return you want.

It is also crucial to know how the prices of different types of carbon credits change over time. These changes can affect how much return you’ll make when investing in carbon credits.

Trading carbon credits through a broker is considered to be a more transparent transaction than doing it via auctions. That is because brokers, the credible ones, are doing their job to find the best trading company that offers high-quality carbon credits. 

They do a thorough investigation, research, and evaluation of the carbon projects that generate the credits, which in turn, they offer to the buyers. They also have the knowledge to help you decide which credits are best to invest in. 

You just have to talk to them about your possible options and make your choice. That’s what you’re paying them for – to do all the work you should have done without them. 

In the end, knowing how brokers work within the carbon credit market and what their role is can help you better invest your money in the right climate solutions.

Should you prefer to know exactly how to invest in carbon credits, go over our comprehensive guide here. 

The post Carbon Credit Brokers: What They Are and How They Work appeared first on Carbon Credits.

Tax Incentives and Carbon Credits for Biofuels

/in /by

Since the Inflation Reduction Act (IRA) was passed by the U.S. Congress last year, the country has started to look at agriculture, and its carbon sequestration, as a key source of renewable energy to produce biofuel and generate carbon credits. 

Several federal and state programs exist that incentivize farmers to turn their agri wastes into biofuel to power vehicles. But it seems they weren’t enough until the government decided to revive and enact the biggest climate change bill. 

To promote clean and renewable sources of energy, the Act incentivizes projects in the sector with $140 billion tax credits. The financial support came in the form of loans, grants, and other incentives to move away from fossil fuels to lower the nation’s CO2 footprint. 

Turning Farm Products and Wastes to Low-Carbon Energy

Renewable energy project developers are seeing great opportunities in converting their agri crops and wastes to cleaner forms of energy like biofuel.

For one, biofuel producers can be eligible to earn the corresponding renewable energy certificates or carbon credits from it. The amount of credits depends on how much carbon their project reduces or removes. 

And more recently, producers of renewable energy in the U.S. are taking advantage of the IRA incentives, either by installing new technology or planning to construct new plants. 

For instance, the Department of Energy had awarded a biofuel company running an ethanol refinery with tens of millions of dollars as grant. The funding is for building a plant that can produce over 1 million gallons of biofuel yearly from wood chips.

Moreover, a carbon capture firm LanzaJet works with another producer to make aviation fuel from a biodiesel plant. The biofuel will be for planes flying from the two largest airports in Chicago.

The plan of the American government to convert agricultural products into energy is not only for cutting emissions but also to boost economic outcomes. Plus, the carbon sequestration capabilities of farms will further drive more agricultural production.   

The Net-Zero Biofuel Producer

One of the biggest projects that the IRA supports is Gevo, a biofuel producer in Colorado operating a 245 acres of field housing corn crops and a refinery plant called Net-Zero 1. The project, which gets its renewable energy from a wind farm, will emit 80% less CO2 than a conventional plant producing ethanol. 

The facility will produce 65 million gallons of aviation fuel each year from processing 35 million corn bushels.

The processes to produce the biofuel, as well as the carbon captured from the air will offset the emissions from the jets. As such, Gevo’s CEO believes it will be the world’s cleanest ethanol plant releasing the lowest CO2 emissions. 

The company’s goals will be achieved only with the financial support from the government through the IRA. 

Its plant will be eligible for a clean fuel tax credit each gallon ($1.75) once it starts operating in 2025. And an additional $85 for each ton of CO2 it captures and stores underground, plus the carbon credits its biofuel plant is eligible to generate.

The company is also expecting a whopping loan guarantee worth over $600 million covering 70% of the plant’s construction expenses. 

All that amid the criticisms of environmental groups worrying about the pollution from agricultural wastes. They claim that more acres of corn production and more manure from farm animals can produce more nutrient pollution. Nitrogen and phosphorus, in particular, pose the biggest problems affecting the water quality in the country. 

Yet, project developers are motivated to build more plants to convert organic wastes to biofuel. 

Biodigesters and the Incentives to Capture Carbon

Currently, there are more than two thousand biodigesters operating in the U.S. But with the passage of the IRA, that number could go up 5 times to about 15 thousand more. 

These biodigesters, mostly in big cattle and poultry farms, are producing methane to use in producing power and transportation fuel. A company in Missouri, for instance, is constructing 6 large biodigesters with funding support from the Department of Agriculture to make methane from animal wastes.

Here’s a sample of how a biodigester works to produce methane (biogas), according to a paper by Kalaiselvan et al.

Source: Kalaiselvan et al., 2022.

A cattle farmer beneficiary said that this is a new means to marry conservation farming and new energy production that “farmers will adopt as fast as society accepts it”.

Industry experts also say that farms focusing on producing energy from clean and renewable sources can significantly reduce the agriculture industry’s emissions. It is one of the largest GHG emitters in the country, accounting for 10% of total emissions.

Crop growers also have a bigger role to play by keeping carbon locked in the soil.

Apart from the tax incentives from IRA, farmers would also benefit from another source of income that their low-carbon farming or carbon sequestration practices can produce – carbon credits. Each ton of carbon they capture and store creates one carbon credit.

Locking in Carbon Away and Earning from it

Soil carbon credits have been becoming popular in the US voluntary carbon market. But like the case with livestock or poultry carbon reduction initiatives, critics abound in producing this type of carbon credit. 

These credits are from projects that improve soil carbon sequestration or enhance the carbon removal abilities of plants. But since there’s no single global standard available for crediting soil carbon projects, issues on quality are plaguing the market.  

In particular, how exactly the changes in soil carbon stocks are measured, reported and verified remains a challenge. Topsoil carbon methodologies such as Verra and Gold Standard perform quantification through various means:

Direct sampling
Modeling 
Calculations 
A mix of sampling and modeling

To put an end to soil carbon credit quality problems, the Integrity Council for the Voluntary Carbon Market released its long-awaited Core Carbon Principles or CCPs. It sets the global standard defining how high-quality carbon credits look based on climate, environmental and social factors. 

The Council’s chair remarked it is vital for the market’s growth, saying:

“Building a widely shared understanding of what high integrity means for carbon crediting programs and categories of carbon credits is a pre-condition for the development and growth of a viable and vibrant VCM.”

The CCP label will bring credibility and integrity to soil carbon and other types of credits. This will further increase the demand for them, along with their prices. 

The post Tax Incentives and Carbon Credits for Biofuels appeared first on Carbon Credits.

Carbon Credit from Tequila Agave

/in /by

The world’s leading tequila brand, Jose Cuervo, partnered with Arma Services and SURECO & Partners to develop a carbon credit certification methodology for Agave plants used in producing tequila. 

Jose Cuervo’s collaboration with sustainability experts and climate financing specialists will significantly impact the tequila industry’s sustainability and green efforts. 

Tequila Industry’s Carbon Footprint

A study on alcohol consumption’s impact on the climate indicates that producing alcoholic beverages emits about 0.73 to 2.38 kg CO2 equivalent per liter (CO2e/L). The findings show these emissions of each alcohol category:

Wine has the biggest climate impact – 2.38 kg CO2e/L
Spirits come second – 2.07 kg CO2e /L
Beer has the lowest emissions – 0.73-0.81 kg CO2e/L

Tequila is a type of liquor that’s even stronger than wine. At 40% alcohol volume, tequila emits about 3 kg CO2e/L, including transportation emissions of 0.5 kg CO2e/L. And since the Tequila industry contributes a lot to carbon emissions, sustainable actions, and collaborations are critical.

Huge carbon footprint reduction efforts are common among all various types of beverages despite the differences in their emissions. But since the source of emissions differs between production processes, each beverage needs tailored fit sustainability solutions. 

It’s also important to note that feedstock, or the raw materials used in producing tequila, has the lowest CO2 footprint. It is the processing and packaging that emits large amounts of CO2, particularly the use of fossil fuels and heavy glass bottles. 

The blue agave plant, also called Mexican agave, is the main ingredient of tequila. 

The partnership between Jose Cuervo and carbon market and sustainability experts seeks to certify agave plantations as carbon sinks. This will then create the corresponding carbon credits for the verified carbon reductions by agaves. 

Agaves’ Carbon Sequestration and Carbon Credits 

Agave is to the drier regions of the world as bamboo is to the wetter parts. Agaves are naturally adapted succulents and deep-rooted trees that are resistant to drought and rising temperatures. 

By planting, pruning, and intercropping agaves, these carbon sinks can suck in and store around 30 to 60 tons of CO2 per hectare (10,000 sq.m.). 

But according to another agave farming expert, agave-based agroforestry, with 2,000 agaves per hectare, can store up to 73.6 tons of carbon over a 10-year period.

Most notably, if cultivated on 2.2 million hectares or 5.4 million acres in Mexico, agaves can sequester 100% of the nation’s annual emissions. 

Add to this the fact that agaves can grow on degraded land like deserts, which are unsuitable for growing crops. They don’t need irrigation or any chemical inputs to survive. 

This carbon sequestration capacity and other attributes of agaves, particularly blue agaves for tequila production, is what Jose Cuervo is looking to certify with carbon credits.  

With 250+ years of experience in producing tequila, Jose Cuervo’s popular tequilas are made from blue agave plants in Mexico. Its Agave Project explores other sustainable uses for the plant. 

The tequila producer is also innovating its production processes to cut down its environmental impact. The move to create a carbon credit certification methodology for agave plantations is another part of its innovation. 

Its collaboration with Arma Services advances the industry’s transition towards carbon markets while promoting sustainable practices to fight climate change. 

Arma Services focuses on developing carbon offset projects that are effective and highly valuable. The company’s expertise lies in the forestry, agriculture, and technology sectors. It is its proprietary AI software to ensure that the carbon credits they create are of the highest quality.

Joining the innovative collaboration is sustainability and carbon market expert SURECO & Partners. According to its CEO, Jessica Jacob:

“This alliance marks a pivotal moment in the tequila industry’s journey towards greater sustainability. By creating a carbon credit certification methodology for agave, we can encourage the adoption of sustainable practices and actively participate in the fight against climate change.”

She also added that the partnership will expand its efforts in reducing global carbon emissions. 

Together with trusted advisors of climate financing, RBA Banca de Inversión and RBA Sostenibilidad, the collaboration will not only establish a carbon credit methodology for tequila’s agave. It will also develop studies and projects, as well as create financing for those who will benefit in the voluntary carbon market.

The post Carbon Credit from Tequila Agave appeared first on Carbon Credits.

Agreena Lands $50M to Expand Regen Ag and Carbon Credits

/in /by

Danish agriculture tech company Agreena has closed a $50 million in Series B funding round for its soil carbon credit program that incentivizes farmers to practice regenerative farming.  

Agriculture accounts for about ⅓ of global carbon footprint, making it a focus of decarbonization projects around the world. And regenerative agriculture is a movement in the industry and has been the apple of the eye of venture capitalists. 

Agreena’s CEO, Simon Haldrup said that:

“This is about more than just carbon credits… It’s a wider play in order to make [carbon farming] viable and drive a whole regenerative movement.”

A Farmer’s Burden 

Land, water, and food are among the most important opportunities for mitigating climate change, says the latest IPCC climate report. Mitigation comes in many ways for these focus areas and better crop management is one of them. Other means include carbon capture and storage and biodiversity. 

Agriculture-based carbon capture has been on the trend and will be the future norm. But it won’t come without hurdles. According to Haldrup, farmers hesitate to adopt regenerative farming practices that capture and store CO2 because they’re unsure of its impact on their yield. 

For farmers who take part in the carbon farming programs, they consider the changes they need to do in their daily operations impractical. Others also think that the payouts don’t compensate for the costs.

In fact, a poll found that a very small percentage of farmers in the US (only 1%) entered into carbon farming contracts.

In Europe, small farmers are not positive about the EU’s climate plan saying that it only burdens them. They refer to the requirements they have to follow in capturing and measuring carbon through regenerative agriculture.  

Add to that other barriers like political, regenerative ag becomes less attractive to farmers. So, Agreena comes in to make it more of a good business opportunity for the farmers, and not make them think it like another regulation to comply with. 

Agreena’s Solution 

Agreena’s technology is designed to help farmers transition to regenerative farming activities that lock in carbon in the soil. Its platform aids them to plan, monitor, and validate their transitions to regenerative farming. 

The company focuses on allowing farmers to create a revenue stream and deal with technical barriers. Here’s how it works for farmers, step-by-step:

Signing up: the farmer signs up on the carbon tech platform.
Locating farm: the Agreena farmer uses the software to find their farm.
Inputting data: the farmer will then input the data on their current farming practices. This usually goes back five years of farming activities. The goal is to establish a starting point from the farmers themselves. Agreena will then use the inputted data to have a strong baseline about each field. 
Calculating potential revenue: the software platform can test various ways that farmers can use to calculate the income they can possibly earn from different carbon farming practices. For instance, they can see what will happen if they adopt reduced tillage. 
Updating progress: once the farmer has chosen a strategy and implemented the regenerative farming methods they pick on their farms, they can update the platform with their progress.

The entire process is continuous. In an ideal scenario, the farmer is already simulating strategies for the next crop when the company is done verifying the previous crop.

So, how can Agreena ensure that the data from the farmers are correct as well as the carbon credits they produce?

That’s through the firm’s in-house MRV capabilities they call the Hummingbird. It helps boost the validity of the carbon credits that Agreena farmers generate. 

The ag tech company verifies the data after harvest through a combination of onsite inspections, external data, AI, and satellite imagery. There is also a 3rd-party that verifies the whole process. 

Only after verification that Agreena issues carbon credits to the farmer. The company may also help the farmer in selling those credits to the voluntary carbon market. 

Farmers can use the proceeds from the sales of their carbon credits to further improve their farming business. For example, they can use the money to buy new machinery, cover yield loss, and keep their ag business moving forward. 

Apart from farmers, companies looking to buy carbon credits for offsetting purposes can also work with Agreena. Agribusinesses, in particular, can use Agreena’s platform to better understand their Scope 3 or supply chain requirements. 

Where the $50M Will Go

The platform is available in 16 European countries. Haldrup also said that their technology helped transition about 1.5 million acres of farmland to regenerative farming. 

Agreena’s recent fundraising is led by Germany’s HV Capital with participation from new investors, Anthemis and AENU. There are also existing investors joining the round such as Denmark’s Export and Investment fund and Kinnevik. 

The ag tech provider will use the funds to expand its carbon farming initiatives and improve financial services to farmers. For example, they can help farmers connect with corporations and access loans for buying equipment needed to fully transition to regenerative agriculture. 

Part of the $50 million will go to building out Agreena’s platform by widening the data available for farmers’ use. As what Haldrup puts it:

“Carbon credits is where we have started, but ultimately we are building a stack of different services to add multiple layers of value to farmers when they’re transitioning.

The post Agreena Lands $50M to Expand Regen Ag and Carbon Credits appeared first on Carbon Credits.

The Core Carbon Principles Published

/in /by

The Integrity Council for the Voluntary Carbon Market has released their long-awaited Core Carbon Principles (CCPs), which could lead toward additional labels that will help buyers identify high-quality carbon credits. They are set to release their

CCPs will set a global standard for high-integrity carbon credits based on clear and verifiable data. Credits that meet the CCP criteria will be labeled and recognized as high-quality.

The CCP label will identify carbon credits that meet the high environmental, social, and climate integrity criteria set out in the CCPs. The Integrity Council will also publish an Assessment Procedure and Framework for carbon-crediting programs, as well as Attributes for credit types, to help buyers identify those that match their preferences. 

The announcement of CCP-approved programs and credit types will begin in Q3, with additional programs and types announced afterward.

Starting in May, the Integrity Council will assess carbon-crediting programs and prioritize approval for credit types that are more likely to meet their criteria. The council will engage experts to conduct an initial review and convene a working group in March. 

They plan to continually improve the Core Carbon Principles and will launch the first revision process in 2025, informed by multi-stakeholder work programs announced in the future.

To ensure CCP labels become available in the market quickly, the council will prioritize credit types based on complexity and market share. They aim to continually improve the voluntary carbon market and encourage greater ambition. The council will provide further information on the assessment process when it releases its final documents in March.

The Integrity Council has been collaborating with stakeholders in the voluntary carbon market, including Indigenous Peoples and carbon-crediting programs, to create a shared understanding of what makes high-integrity carbon credits. They received over 5,000 comments and 350 submissions during a two-month consultation in 2021. They are now finalizing the CCPs, Assessment Procedure, and Assessment Framework.

The voluntary carbon market is currently valued at around $2 billion and traded almost half a billion tonnes of carbon credits in 2021. By establishing a global benchmark for high-quality carbon credits, the CCPs will help to increase the growth of the market. This will mobilize more money and direct it towards the best solutions for climate change.

What are the Core Carbon Principles?

The CCPs and Assessment Framework set out specific requirements that apply to carbon credit programs and different types of carbon credits. 

Carbon credits can only be labeled as CCP-approved if they are issued by a program that meets the requirements outlined in the CCPs and Assessment Framework and their methodologies for verifying carbon credits meet the same requirements.

The Integrity Council will use the same level of rigor and strictness when applying the Assessment Framework to identify which carbon-crediting programs and credit types are eligible for CCP approval. 

This means that programs and carbon credits will be evaluated thoroughly to ensure they meet the high-integrity criteria specified in the CCPs and Assessment Framework.

Carbon Credit Programs

The Core Carbon Principles and Assessment Framework are applicable to specific carbon-crediting programs. Some organizations have multiple programs (Verra, REDD+ etc.), tracks (Clean Development Mechanism etc.), and unit types (CORC, VER etc), making it necessary to clarify which program, track, and unit type the Integrity Council is assessing.

The Integrity Council will evaluate not only whether carbon-crediting programs meet the requirements, but also how they get implemented and enforced in practice when assessing CCP eligibility. This ensures that the programs meet high-integrity criteria and are effectively reducing carbon emissions.

Carbon Credit types

The CCP framework will define the types of carbon credits. 

Carbon-crediting issuing program 
Type of mitigation activity
Methodology used
Scale and country of the activity. 

Each unique combination of these factors creates a distinct type of carbon credit, which must meet the standards set out by the CCPs and Assessment Frameworks to be legitimate.

The 10 Core Carbon Principles: A Guide to Understanding Carbon Credits

The Core Carbon Principles are a set of guidelines that ensure the integrity and quality of carbon credits. Here are the principles you need to know.

They are broken down into 3 Sections: Governance, Emission Impact, and Sustainable Development.

A: Governance:

1. Effective Governance:

Carbon-crediting programs should have effective program governance to ensure transparency, accountability, and overall quality of carbon credits.

Governance is important in ensuring the quality of carbon credits and maintaining trust in the voluntary carbon market. It improves transparency, accountability, and participation while increasing public engagement. 

Key documents should be publicly available to enable transparency and feedback for continuous improvement. The carbon-crediting program must keep up with external market environments and technologies, regularly reviewing standards and processes. 

The program must also have a grievance resolution mechanism for addressing grievances related to mitigation activities in a fair, effective, and transparent manner. Inclusive and informed decision-making requires public engagement in all key processes. 

There must not be conflicts of interest in decision-making, and appropriate processes must be in place for the issuance of carbon credits. The program should also have a corporate governance framework for reporting and disclosure, risk management, and policies and controls such as anti-bribery to support the organization’s long-term resilience. 

The Assessment Framework recognizes that regulatory requirements may satisfy governance requirements for non-profit carbon-crediting programs, but efforts are needed to build trust and scale up carbon finance.

2. Tracking:

Carbon-crediting programs should operate or use a registry to uniquely identify, record, and track mitigation activities and carbon credits issued.

A carbon registry is a technology system used by carbon-crediting programs to track and record carbon credit transactions. It plays a vital role in maintaining the integrity of carbon credits and increasing transaction transparency. 

Registries implement accounting rules to prevent double counting, and must identify each carbon credit and associated attributes. Carbon-crediting programs must have strong know-your-customer processes to ensure only authorized representatives create registry accounts.

3. Transparency:

Carbon-crediting programs should provide transparent and comprehensive information on all credited mitigation activities. Scrutiny of mitigation activities should be accessible to non-specialized audiences.

Transparency is crucial for ensuring the credibility of carbon credits. Mitigation activity documentation must be publicly available, providing stakeholders access to decisions and analyses supporting emission reduction claims. 

Carbon-crediting programs should make sure that this information is readily accessible and available in an electronic format, subject to confidentiality constraints. This information should allow users to evaluate mitigation activity information, including additionality assessment, quantification of emissions reductions or removals, and social and environmental impacts.

4. Robust Independent Third-Party Validation and Verification:

Carbon-crediting programs should have program-level requirements for robust independent third-party validation and verification of mitigation activities.

Third-party auditing is crucial to maintain consistency and integrity in the voluntary carbon market. Independent third-party auditors play a vital role in ensuring that the design of mitigation activities meets the program requirements and crediting the emission reductions or removals are in line with program methodologies. 

To achieve this, carbon-crediting programs must have requirements for third-party auditing. They must also have accredited verification and validation bodies through reputable organizations. 

The VVB’s impartiality is also important, and programs must have procedures to ensure each mitigation activity undergoes a validation and verification audit. 

Oversight procedures include assessing VVBs, reviewing reports, systematic monitoring, and sanctioning non-conformity. A rigorous accreditation process complemented by measures to limit potential conflicts of interest helps ensure impartiality.

B: Emissions Impact

5. Additionality:

Carbon credits should incentivize greenhouse gas emission reductions or removals that would not have happened without the carbon credit revenues.

Project Level

Additionality is crucial to the quality and environmental integrity of carbon credits. It ensures that credits are not given to activities that would have happened anyway. A carbon credit must come from an activity that reduces or removes emissions that wouldn’t have occurred without incentives from the carbon price. 

If a credit doesn’t correspond to real emissions reductions, it could increase global emissions when used to compensate for emissions elsewhere. Voluntary carbon crediting shouldn’t take place if regulations already ensure emissions reductions.

There are different ways to assess additionality, such as financial additionality, barrier analysis, performance-based tests, and common practice analysis. Each approach has its complexities and concerns. Financial additionality ensures that carbon credits make an activity economically viable, but it can be gameable.

Barrier analysis looks at other barriers that prevent activity from happening, but it relies on qualitative judgments. Common practice analysis examines whether an activity is common within a jurisdiction, but there are questions about the appropriate control group.

It’s important to note that regulatory additionality is crucial, meaning that an already regulated activity should not receive carbon credits. The purpose of the additionality assessment under the draft Assessment Framework is to evaluate the carbon-crediting program’s approach to additionality rigorously. All the approaches mentioned are applicable to determine whether there is real additionality.

The Assessment Framework evaluates the chance of additionality for a carbon credit in the first step. The evaluation is based on the financial viability, barriers to implementation, and market penetration rates for the specific mitigation activity. This step does not examine methodologies or program rules. 

Step 1, the Framework for Core Carbon Principles determines the overall likelihood of additionality.

Very high – Leads to a fast-tracked process as the mitigation activity is deemed to meet the additionality criteria if it is fully dependent on carbon credit revenues. The carbon crediting program must then assess whether the mitigation activity is a legally required activity and whether it can reasonably expect to generate revenues. 

If a mitigation activity is solely made possible by carbon credits, it is considered highly likely to be additional, but it must also meet other criteria to be eligible for carbon credits.

Medium –Additional evaluation of the carbon credit program is required.
Insufficient – If a mitigation activity is too profitable in the market, it won’t be eligible for carbon credits even if the carbon crediting program has provisions for it.

Step 2, The Assessment Framework evaluates how well the carbon-crediting program assesses additionality, based on the results of the first step. This includes reviewing the program’s documents and methodologies used for quantification.

The Assessment Framework provides specific criteria for assessing the approaches used by carbon-crediting programs such as:

Benchmark analysis – involves comparing the economic performance of a mitigation activity with a financial benchmark, such as the hurdle rate for the internal rate of return (IRR).

Investment comparison analysis – comparing the economic returns of a proposed mitigation activity to other investment options that may be available.

Barrier Analysis – examining any obstacles that may prevent the mitigation activity from being carried out successfully.

Market Penetration Assessments – How much a particular type of mitigation activity or technology is already being used in the relevant geographical location.

6. Permanence:

Carbon credits should ensure permanent greenhouse gas emission reductions or removals. Any risk of reversal should be fully compensated.

Preservation of carbon reservoirs may reverse due to human or natural causes. Temporary storage can’t substitute for permanent reduction. Reversible mitigation is still important in global warming reduction efforts. 

High-integrity approaches include crediting on a temporary basis or monitoring and compensating. Practical, technical, and political considerations for permanence. 

Compensation mechanisms can’t be maintained perpetually. Two ways to occur within carbon markets: establish rental payments or internalize carrying costs. Weak guarantees may lead to inefficient mitigation investment allocation.

Different project activities have varying levels of non-permanence risk. Solar panels can be considered permanent, while forestry activities have high non-permanence risks. The framework recognizes different non-permanence risk levels for different mitigation activities.

Activities:

No Reversal Risk – no requirements are imposed.
Low Reversal Risk – mechanisms to address voluntary reversal risks are required.
Material Reversal Risk – stronger mechanisms to address both intentional and unintentional reversal are mandated.

Carbon crediting programs use temporary crediting, buffers, and discounting to address non-reversal risk. There have been attempts to create insurance mechanisms but none exist yet. 

The permanence assessment aims to ensure emission reductions are permanent over a long period. Approaches include discounting, buffer pools, and temporary crediting. The approach focuses on three equal criteria for permanent credits in the current market.

Duration – the length of time to monitor and compensate for reversals is important for carbon-crediting programs. Longer commitments provide stronger assurance, but practical issues of institutional and legal stability may limit duration.
Incentives & Mechanisms – The carbon crediting program’s strength of mechanisms and incentives to compensate for reversals is assessed. The risk of reversals can be compensated through the use of buffer pools, discounts, or insurance.
Stability – When there is institutional stability, legal liability, and other provisions are available to compensate for reversal over the long term and contribute to addressing the risk of non-permanence.

The Integrity Council emphasizes the need for a high level of assurance of permanence for credits assumed to be permanently valid.

Temporary crediting is an alternative approach that recognizes the risk of reversal by instituting a validity period for credits and putting the liability for reversal on the potential buyer. 

Mechanisms that do not require credit replacement or compensation for reversals are not eligible to earn the Core Carbon Principles label. Jurisdictional REDD+ mitigation activities follow similar approaches and criteria for the duration of the commitment period and the sufficiency of compensation mechanisms. 

Carbon-crediting programs should be judged on the application of generic criteria, with differences in context and partnership with the government rather than private sector actors.

7. Robust Quantification of Emission Reductions and Removals:

Carbon credits should be robustly quantified based on conservative approaches, completeness, and sound scientific methods.

It is important to reliably quantify emissions reductions or removals from mitigation activities. Conservative estimates are necessary to prevent the over-generation of credits and invalid claims. 

Quantification protocols are part and parcel of methodologies and provisions, including additionality, permanence, and monitoring and reporting plans. The draft Assessment Framework proposes three key criteria for program and mitigation activity type provisions on quantification of emissions reductions and removals. 

The first criterion is a methodology development process, including stakeholder participation, periodic updates, and reviews. The second criterion relates to requirements addressed in quantification protocols. 

The third criterion is the review and approval of the quantification protocol by a competent body or authority. These criteria are crucial in ensuring the environmental effectiveness of mitigation activities and the validity of carbon credits generated.

8. No Double Counting:

Carbon credits should be robustly quantified based on conservative approaches, completeness, and sound scientific methods.

Carbon credits should not be double-counted, which covers double issuance, claiming, and use.

Double counting carbon credits is a major concern for the integrity of the voluntary carbon market. Double counting occurs when the same carbon credit is used for different claims. It can also be when the same emission reduction is credited under different programs. 

This undermines the legitimacy of the carbon-crediting system and the use of carbon credits. The draft Assessment Framework seeks to avoid various types of double counting, and measures are in place to prevent it. 

There is an ongoing debate about whether double claiming should be avoided in the context of voluntary climate commitments. The Paris Agreement and company accounting systems are viewed by some as working in parallel, while others see them as inherently connected. The Integrity Council has not taken a position on this issue and invites views on it and other topics related to alignment with Article 6 of the Paris Agreement.

C: Sustainable Development

9. Sustainable Development Impacts and Safeguards:

Carbon-crediting programs should have clear guidance, tools, and compliance procedures to ensure that mitigation activities conform with established best practices on social and environmental safeguards while delivering net positive sustainable development impacts.

Ensuring social and environmental integrity is crucial in generating carbon credits. Carbon-crediting programs must implement safeguards to avoid or minimize the risk of harm and deliver net positive sustainable development impacts. 

Requirements should cover responsibilities for managing environmental, economic, and social risks and impacts, ensuring respect for human rights, including IPLCs, and promoting net positive SDG impacts.

Benefit-sharing is also essential to promote continued support and buy-in for mitigation activities. And then carbon-crediting programs should have equitable and fair benefit-sharing practices in place. 

The REDD+ and the World Bank’s frameworks provide guidance for carbon-crediting programs. Mitigation activity documentation must be publicly available for transparency and stakeholder access to decisions and analyses. 

Carbon-crediting programs must have KYC processes for account opening, and each mitigation activity must undergo validation and verification audits. The registry system must implement accounting rules to avoid almost all forms of double counting. And carbon credits must follow a clear chain of custody. 

To be elligible for Core Carbon Principles label, carbon-crediting programs must also have:

robust governance approaches,
procedures for regular reviews,
public engagement measures, and
conflict-of-interest prevention measures.

10. Contributing Towards Net Zero Transition:

Mitigation activities should avoid locking in levels of emissions, technologies, or carbon-intensive practices that are incompatible with achieving net zero emissions by mid-century.

The Paris Agreement’s long-term goal of achieving net zero emissions has made it imperative to discourage any mitigation activity that would lead to a locked-in increase in long-term emissions, even if it results in short-term emission reductions. 

The Assessment Framework proposes standardized attributes for tagging carbon credits to address the risk of lock-in for particular technologies and mitigation activity types. The proposed attributes include “Type of mitigation outcome,” “Host country authorization for the purpose of Article 6 of the Paris Agreement,” “Quantified SDG impacts,” and “Adaptation co-benefits.”

The post The Core Carbon Principles Published appeared first on Carbon Credits.

Canadian Gov’t Sets out $83B for Clean Investment Tax Credits

/in /by

Canadian industries seeking to slash their carbon footprint can expect $83 billion in clean investment tax credits after the federal government of Canada unveiled its 2023 budget. 

The 2023 federal budget includes tax credits for these three investments – clean electricity, clean-tech manufacturing, and hydrogen. Adding investment credits in carbon capture and storage brings the total tax incentives to about $83 billion through to 2034-35. 

Canada’s Clean Investment Tax Credits

The Canadian government said the spending is crucial to bolster the clean energy transition. It is also in response to other countries’ subsidies, particularly the U.S. Inflation Reduction Act passed in August 2022. IRA unlocked $369 billion to help heavy industries decarbonize through production tax credits. 

Deputy Prime Minister Chrystia Freeland, who introduced the federal budget, noted that:

“In what is the most significant economic transformation since the Industrial Revolution, our friends and partners around the world, chief among them the United States, are investing heavily to build clean economies.”

The largest focus of the tax credits is on clean electricity, which costs more than $6 billion over the first 5 years beginning in 2024. That amount will go up to over $25 billion until 2034-35. 

Indigenous-owned companies and provincial utilities can benefit from the clean tax credits.

Cleantech manufacturing will get about $11 billion in credits while carbon capture will take over $12 billion through to 2034-35.  

The clean hydrogen credit is worth about $5.6 billion over 5 years. Higher rebates go to projects that produce the cleanest hydrogen. 

Some industry players believe that the credit package for clean electricity is the most significant for meeting Canada’s climate goals. 

Canada adopted construction-focused project support, while the US opted for operational incentives depending on production volumes. In a sense, Canada has to offer more to compete with the US which rolled hundreds of billions of tax incentives. 

Canada’s Version of CCfDs 

Still, the federal budget wins praises for advancing the country’s transition to clean energy. But because it’s not covering operations, Canada has to have carbon pricing backstop up its sleeve. This is where its promised carbon contracts for difference (CCfDs) becomes important. 

CCfDs are a kind of insurance that enable investors to hedge against the possibility that the carbon tax will be eliminated by the future government. Tax scrapping in the future is the major reason why the oil and gas industry leaves carbon capture technology on the shelf. 

The industry didn’t have much from the budget, apart from minor changes in last year’s carbon capture incentives. It will receive a 50% tax credits. 

The CCfD will offer certainty to industry on future carbon pricing and credits. The policy will ensure that the carbon tax in the country remains relevant for years to come. 

In other words, companies can enter into contracts with the government trusting that they can recoup their investments in carbon capture even if the carbon tax is scrapped later on. 

But just like other policies, these contracts are still under consultation. 

The $15 Billion Canada Growth Fund

The CCfD will be implemented through a $15 billion Canada Growth Fund. The Fund was part of last year’s budget announcement. 

Though key details about CCfD are still lacking, the largest oilsands producers via its group, Pathway Alliance, praised the budget. The group is looking forward to having a “better understanding of the government’s intentions for CCfDs”.

However, some analysts think that the federal gov’t needs to pump in more money to incentivize investments in clean energy and reach its climate change targets. 

A Fixed Price for Carbon Credits, not Carbon Tax

Other industry experts believe that the proposed CCfDs program is too generous. That’s largely because they think that the Liberals seem to put a fixed price for carbon credits, not carbon tax. 

Climate campaigners find that weaker than the opposite – a fixed carbon tax is a stronger means to compel polluters to cut their emissions. They said that the CCfD program may cost the Canadian government more money than expected. 

But the proponents may find it more limiting to allow heavy emitters to pay for their pollution through carbon tax. It’s because they will pay only for a certain percentage of their total carbon footprint. 

On the contrary, allowing them to gain carbon credits for the carbon they captured will prompt them to abate their entire footprint. That’s because such credits won’t be subject to the carbon tax. 

Other industry leaders argue that the spending will be a bigger burden to the taxpayers, not the industry. The cost of the transition will shift too much onto those who pay the taxes. 

But overall, many find the budget praiseworthy by prioritizing investments on the clean energy transition. 

The 2023 federal budget, which includes 268 pages, will be up for intense debate and scrutiny in the coming months. 

The post Canadian Gov’t Sets out $83B for Clean Investment Tax Credits appeared first on Carbon Credits.

EU to Auction €8 Billion Carbon Credits Earlier this 2023

/in /by

The European Union (EU) seeks to carry out early auctions of its carbon credits or allowances this year, starting from July.

The goal of this decision is to raise extra funds to help EU nations reduce emissions and end reliance on Russian gas, says the European Commission (EC).

€8 Billion from Carbon Credit Sales

Established in 2005, the EU Emissions Trading System (ETS) is the world’s biggest carbon market, covering about 40% of total EU emissions.

The bloc aims to secure 20 billion euros ($21.62 billion) in grants from its carbon market. And €8 billion of that will come from the sales of EU carbon credits or permits happening earlier than scheduled.

According to the EC, there are about 16.5 million additional carbon credits for auction early in 2023. 

The remaining €12 billion will be from a carbon market fund intended to support green technological innovations. But this will only begin until the EU makes some changes in its law on carbon market auctions to verify the new volumes.   

In December last year, the EU made a new deal to reform its carbon market. The agreement is to make three major changes to the market:

To accelerate emissions cuts,
Phase out free allowances (carbon credits) to industries, and
Targets fuel emissions from the building and road transport sectors.

With the new deal, the original target of reducing the bloc’s emissions 55% by 2030 relative to 1990 levels increases to 62% from 2005 levels. Industries covered by the EU ETS must cut their emissions by that amount.

The Commission further said that selling 27 million carbon credits from a reserve into the market will replenish the EU carbon fund.

Decarbonizing Heavy Industries

EU member states are allowed to use the grants in renewable energy and energy-saving renovations to substitute Russian gas. They can also spend the money to help heavy industries decarbonize. 

After all, the EU’s core policy for reducing emissions is to force power plants and factories to pay for their pollution by buying carbon credits. 

For the first time in history, EU carbon prices hit over 100 euros per ton in February. That’s a significant increase from just a few years ago when the price was only 10 euros/ton. 

The price surge increases costs for industries but also improves the chance to invest in green technologies. 

Happened in the same month, the EC also set out $270 billion to support the bloc’s race to green transition and boost its net zero industry. This refers to the EU Green Deal Industrial Plan. The Plan will help ensure that the EU has access to various green technologies and solutions that are key to its net zero transition while bringing more quality jobs.

As part of the Plan, the EC proposed the Net-Zero Industry Act to ramp up manufacturing of clean technologies. The Act will establish a simpler and more predictable legal framework for net zero industries in the region. It will also make the bloc’s energy system more secure and sustainable during transition. 

The Commission said that the carbon credits for auction will be sold in the same volumes by August 2026. 

The post EU to Auction €8 Billion Carbon Credits Earlier this 2023 appeared first on Carbon Credits.

What are Blue Carbon Credits? Everything You Need to Know

/in /by

Carbon credits from offset projects such as reforestation and direct air capture have become popular, but a new crediting method still in its infancy is quickly gaining attention globally – blue carbon. 

The role of marine ecosystems in removing carbon emissions has been in the spotlight lately, and the idea of a market to finance their protection.

Coastal ecosystems such as mangroves, tidal marshes and seagrass meadows can protect coastlines from disasters like storms, rising sea-levels and shoreline erosion. They regulate water quality and provide habitat for fish, ensuring food security and livelihoods for local communities.

But these ecosystems have been gaining more popularity for their role in fighting climate change by capturing and storing carbon from the atmosphere. Thus, giving them new fame as “blue carbon” ecosystems along with the credits they create – blue carbon credits.

As this fame is gaining momentum, many are asking what is a blue carbon credit? What are the possible ways to invest in it and how to buy it? This guide will help you learn everything you need to know about blue carbon credits and what to do to join this growing market.

What are Blue Carbon Credits?

Coastal habitats cover 2% of the ocean’s surface but store 50% of the carbon in their sediment. They’re a 75-gigaton carbon sink, which is equal to 8 years of carbon emissions from fossil fuel. 

The bad news is that these ecosystems are under threat – between 25% and 50% of marine habitats have gone in the past 100 years, according to the UN panel.

So, unlocking investments for this field through blue carbon can be the solution to saving these ecosystems. 

Blue carbon is a new concept which refers to carbon that’s stored in marine ecosystems mentioned earlier. Those ecosystems are providing a couple of ecological services like shoreline protection and water quality maintenance.

Source: NOAA Climate.gov, graphic adapted from original by Sarah Battle, NOAA Pacific Marine Environmental Laboratory.

More remarkably, blue carbon gains more attention as a potential source of carbon credits as they can capture and store huge amounts of carbon for long periods of time. In fact, research found that coastal wetlands and seagrass beds suck in carbon up to 40x faster than tropical rainforests. This makes them a valuable resource for mitigating climate change. 

But as it’s still in its early stage, there are many challenges that have to be fixed before it can be fully integrated into the global carbon market. 

Fortunately, as there’s growing interest and momentum around the world to develop blue carbon projects. And many of these organizations continue to develop standards and methodologies to measure and verify the CO2 stored in coastal ecosystems. 

How is a blue carbon credit generated?

When an ecosystem like a seagrass meadow is protected or restored, it can capture CO2. If this carbon capture is quantified and verified, it generates blue carbon credits. These credits are tradable on carbon markets for entities wanting to offset their GHG emissions. 

The revenue from the sales of blue carbon credits can then help fund the conservation and restoration of those ecosystems. 

To ensure that blue carbon credits are verifiable, they must meet established standards for carbon accounting and verification, such as the Verified Carbon Standard or the Gold Standard. The standards help make sure that the credits are indeed real, measurable, and verifiable carbon reductions and the projects that produce them meet the criteria. 

So far, the most popular projects are on restoring mangroves around the world. Mangroves have been estimated to prevent ~$65 billion in property damages and lower flood risk to millions of people each year.

Factor in their ecosystem service benefits projected to be at the range of $462 to $798 billion every year, and you get the picture how crucial their role is.

In 2021, Apple and Conservation International partnered to turn 11 thousands acres of mangroves to be the first to have its carbon sequestration potential converted into blue carbon credits verified by Verra.

Conservation International also worked with Procter & Gamble in a project that protected over a hundred thousand acres of mangroves in Palawan, Philippines. 

While mangroves are the most common sort of blue carbon projects, other initiatives also exist that produce blue carbon credits. Restoring and protecting marshes, seagrass, and kelp forests are also gaining interests from investors. 

Even more emerging is the concept of carbon sinking through seaweeds. Instead of letting the seaweeds decompose on shorelines, carbon sequestration companies take them to the ocean floor to capture carbon.

All these promising carbon sequestration abilities capture both investors and environmentalists. But there’s still a big gap in investment to support blue carbon projects. 

An estimate said that only 3% of the total climate investments goes to nature-based solutions and blue carbon efforts receive a small chunk of the funds. 

But the nascent sector is starting to get a lot of questions about how to invest in blue carbon projects via the credits they generate. If you have the same query in mind, let’s help you know your options.

How To Invest In Blue Carbon Credits

Blue carbon markets are relatively new compared with terrestrial carbon sequestration markets like tree planting. But they are seen to be a big part of the global demand for carbon credits.

The Taskforce on Scaling Voluntary Carbon Markets (TSVCM) estimated that the carbon credit market will grow 15x its 2020 levels. It can be worth as much as $50bn by 2030.

In 2021, the value of the voluntary carbon market (VCM) is only $1 billion with some estimates to go up to $1.7bn in 2022.

The percentage of blue carbon credits trading in the VCM remains to be seen. But the trends say that they’re here to stay and grow.

When it comes to investing in blue carbon credits, it might be a bit more challenging than investing in other forms of credits. But for only one reason – the market is quite new and not yet established.

But that means you can’t invest in the market and support its growth. 

With that said, here are the three ways on how to invest in blue carbon credits:

1. Investing directly in blue carbon projects

While we can’t tell the exact number of companies developing blue carbon projects, there are many companies and organizations that are currently involved in this field.

Many companies are also interested in investing in these projects as a means to mitigate their carbon footprint and contribute to the conservation of coastal ecosystems. Some big names include Microsoft, Airbnb, and Shell. 

There are also many non-profit organizations and government agencies that are taking part in blue carbon conservation and restoration efforts.

Some blue carbon project developers may offer investment opportunities for you. These investments can be in the form of equity or debt financing. And the returns you get can vary depending on the project’s success.

2. Investing in blue carbon funds

If you prefer a more liquid investment opportunity, then you may want to invest in blue carbon funds. Some investment funds are focusing on blue carbon. 

This investment scheme can give you exposure to a diversified portfolio of blue carbon projects. Plus, the funds can also give you a more accessible way to invest in blue carbon credits than the first option above.

3. Buying blue carbon credits on the VCM

One last way for you to make your money grow with blue carbon is to purchase the credits on the VCM.

There are now a lot of platforms that allow you to buy carbon credits from blue carbon projects. You can use these credits to offset emissions or you can have them as a form of investment. 

But just remember to do your research to ensure that the credits you buy are from legitimate blue carbon projects.

So there you have it. The ways how to put your money into the market and grow it. 

A quick reminder though… investing in blue carbon credits has some risks, just like any other investment opportunities out there.

The major risks are natural – erosion, floods, and storms. Other risks may have something to do with regulations when developing and implementing the projects.

So, don’t forget to do your due diligence to know what investment option works best for you.

The same goes if you’re planning to buy blue carbon credits and want to know how. 

How To Buy Blue Carbon Credits

One big question you would want to know first is how much a blue carbon credit is worth? Just like other types of carbon credits, a blue carbon credit’s price is influenced by several factors. 

Location of the project is one factor. In Asia and Central America, each credit for blue carbon projects costs the range between $13 – $35. 

You can also buy blue carbon credits in many ways. Here are your few options, which are basically the same as the ways how to invest in blue carbon projects:

1. Purchase credits on the VCM

Blue carbon credits are traded on the VCM as one among the different types of credits available. Though not all of the companies selling carbon credits may have blue carbon credits in particular. 

You will know by visiting their website to see what projects those credits are from. 

The voluntary market is rich with different platforms trading blue carbon credits. But then again, see to it that the credits you buy are real and verifiable.  

2. Buy through investment funds 

You can also get the credits specifically from investment funds or ETFs (exchange-traded funds). These funds also come in different types so pick the one that’s into blue carbon projects. 

They offer investors the opportunity to earn returns while also financing the development and deployment of coastal and marine ecosystems. So, if you decide to buy through these funds, you’ll expose yourself to diversified funds with different risks.  

Just select the right fund that meets your offsetting needs. 

3. Direct investment

Lastly, you can also get the credits through direct investment in the project of your choice. You can buy them either in the form of equity or debt financing. The latter may offer higher returns for investors but they also come with bigger risk. 

If you decide to pick this last option, you may need to make sure that the project satisfies the established criteria and standards for blue carbon accounting and verification. 

You may also want to consider any co-benefits that the project provides such as local job creation and biodiversity conservation. The important thing is that your purchase aligns with your goals. 

Investing In Blue Carbon Credits

If you are interested in investing in blue carbon credits, it would be a great way to have another income stream while supporting the protection of marine ecosystems. 

But before you do, here are some things to keep in mind first:

Understanding the market: this means knowing the various types of projects that produce blue carbon credits, the specific type of credits available, and the demand for those credits. 

Assessing the investment opportunities: as mentioned earlier, there are many ways to invest in blue carbon credits. Carefully assess each of the options to know which one fits your investment goals and purpose. 

Weighing returns vs. risks: though investing in blue carbon credits offer attractive returns, there are also some risks that come with it.  As the demand for carbon credits grows in the long run, the value of blue carbon credits may also grow.

Doing your due diligence: before you invest in blue carbon projects or funds, perform a thorough research about it first. Just ensure that the project is capable of achieving the goals it claims it will do.   

So, overall, investing in blue carbon credits is a great means to contribute to climate action while getting a chance to earn. These credits are becoming more popular as the projects they support are very capable of keeping carbon away from causing more temperature rise. 

The post What are Blue Carbon Credits? Everything You Need to Know appeared first on Carbon Credits.