Thursday, January 19, 2023
Finally. That was my first reaction to reading the
This is what we at Compensate have been saying for years. Current market standards on the Voluntary Carbon Market have systemic problems with quantifying the real impact of especially REDD+ forest protection projects.
Finally, the media is highlighting the problem as a systemic issue. It is not just about a few bad apples. Similarly to the latest media investigation, Compensate’s ‘
Rigorous criteria and risk mitigation measures
The first step is to acknowledge that there is a problem. This became very apparent when in early 2020 we started, together with a panel of leading climate and forest scientists, drafting our own
We have now used the criteria to evaluate more than 170 nature-based, mostly forest protection or reforestation projects certified by the leading international carbon standards. Especially REDD+ projects use faulty baselines that allow these projects to issue millions of essentially worthless credits. We have also developed a unique model of overcompensation with which we can take into account risks that even the best projects on the market might entail. In theory, each carbon credit is worth one tonne of CO2. However, due to the many uncertainties in carbon projects, which are not always rigorously taken into account or mitigated by current standards, Compensate can’t be confident that one standard carbon credit really equals one tonne of CO2 either as avoided emissions or as CO2 removed from the atmosphere.
Compensate’s strict evaluation process includes scoring projects in order to estimate the real climate impact of one carbon credit. This results in a project-specific climate impact score. For instance, for a project with an impact score of 0.7, one credit is deemed equivalent to 0.7 tonnes of CO2. In order to provide a robust offsetting claim, Compensate overcompensates by purchasing enough credits to reach a real impact equivalent to one tonne of CO2.
Another important tool in managing risks is our portfolio approach. Like investment managers managing a fund to deliver the best value, Compensate creates and manages a diverse carbon project portfolio to deliver the best possible climate impact. Naturally, diversification serves also as further mitigation against the risks associated with any given project.
The portfolio is diverse and dynamic, making it possible to mix a wide range of project types, while regularly monitoring and replacing existing projects with even better ones.
Compensate is committed to developing the portfolio according to the
The past three and half years have been a constant learning process for us. Even though we go much further than existing market standards, we are constantly working to further improve our approach. We also use our project criteria to continuously re-evaluate projects that we have previously accepted in our portfolio.
The Source Material article highlights two projects from which Compensate has bought credits in the past. The Madre de Dios project in the Peruvian Amazon and the Kariba project in Zimbabwe were both re-evaluated when new information from them emerged and immediately removed from the portfolio as we discovered the same irregularities that Source Material described in their recent article.
From the project in Madre de Dios, Compensate bought credits from a previous monitoring period, when logging was not happening yet. While we were waiting for the new issuance of credits in November 2021, we reviewed the new monitoring report as part of our standard re-evaluation process and discovered evidence of forest clearing in areas that the project was planning to exclude.
The German NGO Foodwatch also published a report around the same time adding even more details to the information that could be found in official Verra documentation. As a result of our own re-evaluation and in the light of the Foodwatch report, we immediately removed the project from our portfolio. Even though the credits we purchased were unaffected by the excessive logging, there were still concerns related to permanence if changes in carbon stock due to logging would not be accounted for. Indeed, the common practice is that any carbon losses are deducted from future issuances, so that fewer credits will be issued next time.
The second project discussed in the Source Material article, Kariba REDD+, figured in Compensate’s portfolio until December 2020. Initially, it was difficult to estimate with high confidence the reliability of the baseline, as open source satellite maps, like Global Forest Watch, are not accurate for dry savannas due to sparsely populated forests with a lot of shrubs. To mitigate this uncertainty we overcompensated credits from this project between 5 to 8 times, meaning buying 5-8 credits for each tonne of CO2 to offset. The project was removed from the Compensate portfolio after our 2020 end-of-year re-evaluation, when an older CCB Project Description with a much more conservative baseline was discovered, as outlined by Source Material.
Compensate is striving to always offer the best projects available in the portfolio. The examples of Kariba and Madre de Dios validate our approach of constantly evaluating new projects, re-evaluating known ones and improving the quality of our overall portfolio by replacing existing projects with increasingly better ones.
We need a well-functioning market
We are already in the middle of a severe climate crisis, and we need mechanisms that will help us bring CO2-concentration in the atmosphere back to the safe levels that were last met in the 1980s.
I truly believe that the growing voluntary carbon market will be a crucial tool in tackling the climate crisis. Julia Jones, a professor at Bangor University, puts it well in the Guardian article: “As someone who sits outside of the kind of cut and thrust of the wild west that is the carbon markets, I need to believe it can be made to work because money is needed to fund the emissions reductions from forest conservation.” But, in line with the article, I strongly agree that the market needs to deliver real results.
Luckily, there are several initiatives working on reforming the market, most importantly the Core Carbon Principles (CCP) proposed by the Integrity Council for the Voluntary Carbon Market (ICVCM). The core carbon principles would be a huge leap ahead, if and when they got supported by enough market actors. Also, organizations like Verra, which have thus far vocally opposed adopting the CCPs, should get on board.
We urgently need to direct more funding to projects that preserve and protect forests. But we also need to consider the end use of carbon credits created from such projects. If and when they are used for offset claims, the credits need to be extremely robust. The critical need to protect our valuable carbon sinks cannot be a justification for producing carbon credits that don’t in reality counterbalance emissions. For all of us who believe in carbon markets as a solution, it’s crucial that we now focus on integrity and show that we can make this market work.
Niklas Kaskeala Chief Impact Officer Compensate