Webinar Q&A: How to purchase high quality offsetting?

Tuesday, September 13, 2022

The Compensate webinar, How to purchase high quality offsetting, was arranged in September 2022. In this Q&A, we answer the questions we received during the webinar. If you missed the webinar you can download the webinar recording

How long does it take to verify a project?

At Compensate, we use open source satellite data, scientific and media articles, in-depth discussions with the project developers and desktop research to conduct the evaluation process. The evaluation starts with Pass/Fail questions which are the bare minimum for a project to be added in the portfolio. The Pass/Fail criteria cover additionality, reliable baseline (no overestimated climate impact based on unrealistic projections), no double counting, net-positive impacts for local communities and biodiversity. Most projects fail at that stage.

You can read more about project evaluation here .

How did you end up with the 7 characteristics of high integrity carbon credits? Different sources (e.g. Gold Standard) have somewhat different criteria. Finnish Ministry of the Environment has done some research on this issue. We have developed our own evaluation criteria for forest projects in the beginning of 2020 in collaboration with Compensate's Scientific Advisory Panel. Our criteria are much stricter and go beyond current standards on the market. The criteria are published on our website: https://www.compensate.com/project-criteria-and-evaluation. You can read more about using the criteria in practice and why projects fail in our 2021 white paper on reforming the market. Are there recognized certificates for carbon projects/credits from them? Especially in the early days of the voluntary carbon market, the lack of standardized quality criteria generated widespread concern. In response, carbon market actors launched several efforts to create standards and protocols to improve the quality and credibility of voluntary offsets. Standards like Verra, Gold Standard and American Carbon Registry (ACR) have become market leaders in reassuring offset buyers about the quality of the carbon credits that are being bought. Still as seen from Compensate’s experience these leading standards leave a lot to be desired.

The need for removals is clear, but wouldn't that leave out of the market many communities and Indigenous Peoples that already protect large carbon stocks and could benefit from the carbon market?

Very important comment. Avoided emissions projects, like REDD+ should definitely be supported. But it is questionable if they should be used for offset claims. We support the development of alternative claims like "climate action" for these project types.

Are you providing your feedback to the IC VCM's CCPs? These are trying to answer the same questions and I think will become the industry benchmark. Yes, there is an ongoing consultation for the CCPs and we are replying to it. We have already been active at earlier stages of the process under the TFSVCM.

How much does Compensate rely on the work the VVBs do? Do you reassess everything they do as well? We evaluate all information provided in the project documents and evaluate if it is really matching with the situation on the ground, for example, in terms of deforestation rates, deforestation drivers, and community conflicts. We use open source satellite data to compare the project area with the selected reference area to see if both areas are similar. We do this to assess whether the project's climate impact is overestimated based on unrealistic projections.

I understand using satellite data to assess and evaluate project areas. How do you approach community conflicts? Is this desk-based research or on the ground evaluations?

For community conflicts, we conduct a desktop research incl. reviewing scientific and media articles on existing conflicts and we also work closely with the project developers to get the most accurate on-the-ground insights.

What is your stand on projects in boreal forests? Yes, we are definitely considering projects in boreal forest. But currently, most projects don't meet our criteria. And in countries like Finland, the double counting issue prevents us from using projects here.

I have a question concerning double counting. To avoid it, you explain the need that “the project developer [has] ensured the exclusion of the emission reduction from national greenhouse gas registries. ” However, by doing so, doesn’t it deprive the countries where those projects are implemented from opportunities to reduce their own emissions in order to meet their reduction commitments, as they will presumably have to move to other, more expensive projects to reduce their carbon footprint? This may be especially problematic for projects that take place in poorer countries, where this might be seen as an injustice or a form of colonialism. Extremely important comment. The double counting issue needs to be solved in all countries that have signed the Paris Agreement, so this does not concern only countries in the Global South. Several countries, including many in the Global South have already agreed to apply what are called corresponding adjustments. 

Another solution to the double counting issue would be differentiating claims into offset claims and “contribution claims”. Under the contribution model, companies would finance climate action and help countries meet their climate targets without making a compensation claim.

Countries can decide to apply a corresponding adjustment to the level they are comfortable with e.g. for certain carbon projects on the voluntary carbon market, so that this will not prevent them from reaching their climate targets. As buyers are demanding credits which are not double counted in order to make reliable carbon neutrality and net zero claims, countries providing corresponding adjustment will receive more investments into climate change mitigation projects, such as nature restoration projects, agroforestry and conservation projects. These investments will have immediate benefits for local communities and contribute to reaching SDGs.

Indeed, if the claim is one of contribution rather than offset, then this problem does not appear (but many people speak of “offset” rather than of “contribution”, so my question is addressed to those who use this vocabulary and consider that we can indeed compensate our emissions). Do you have some references about those “corresponding adjustments” you mention? The discussion around "alternative claims" is still evolving so not too many standards on that front yet. We discuss the topic in our Get the Claims Right white paper . Would a significantly higher price of carbon credits on the market resolve the need to overcompensate?

Better quality credits are often more expensive, but a high price is not a guarantee for quality and real climate impact. We overcompensate even very expensive innovation carbon removal projects. Do you advise companies buying the offsets on how to normalize mass unit of CO2eqv emitted with mass unit of CO2eqv delayed emissions (Biogenic carbon storage) and so, how do you do the normalization? We always sell a portfolio to our clients, comprising different project types, including afforestation/reforestation and forest conservation projects. In addition, 20% of the portfolio is allocated to innovative carbon capture incl. permanent carbon removal e.g. biochar, ocean carbon sequestration, and CO2 infused in cement. In addition, we apply an overcompensation factor for each project based on the score the project received during the evaluation. This in practice means buying more credits than it is technically necessary to make an offset claim to mitigate some of the uncertainties and risks with projects. We are aligned with the Oxford Principles of Offsetting and shifting the focus of the portfolio towards nature-based removals and permanent carbon capture methods in the future. You can read more about the Oxford Principles here . Do you rely on Ratings agencies such as Sylvera, BeZero, Calyx to help you decide on project quality? Yes, we are actively in talks with ratings agencies, but thus far we have felt that our own analysis and criteria are more strict.

New to carbon offsetting, and wondering if operational/intermediary costs are taken into account to help determine whether a fair amount of the offset compensation is reaching the community?

We always work directly with project developers, whenever this is possible, to ensure that the money reaches the project and the people on the ground. Some of our projects distribute direct cash payments to the local farmers planting trees.

What is your view regarding technology based carbon removals solutions? Especially techonolgy based projects like Direct Air Capture for example, consuming renewable energy that is then not used to reduce emissions in the first place. In all pathways to 1.5°C, the IPCC deems carbon removal projects necessary, sizing the need to between 100-1,000 Gt CO2 in the 21st century; certain emission categories are expensive and difficult to abate, so net negative removal options are required to achieve net-zero.

Technology-based permanent carbon removal methods which are currently emerging are a necessary tool for climate change mitigation. The global restoration potential is limited by the land availability and food security considerations over carbon sequestration, whereas the global renewable energy potential is unlimited, meaning that there shouldn’t be a conflict over renewable energy usage.

For projects involving local communities, do you review the benefit sharing agreements in place (to ensure local communities benefit equitably from the sale of the credits)? If so, what criteria do you have in place to assess the robustness of such benefit sharing agreements?

We  require that projects have measurable positive benefits for the local communities and the benefits are fairly distributed, also to non-land owners. We also select projects where most of the carbon credit revenue funds go back to the project and reach the people on the ground. We have a couple of projects with direct cash payments. For example, TIST distributes 70% of the carbon credit revenue directly to the farmers. Other projects invest large part of the money from carbon credit revenue for creation of livelihood activities. Is your way to handle the comparison of quality in terms of permanence to build a portfolio of a smaller share of permanent credits a larger share of temporary credits? Or how do you assess the robustness when you have completely different permanence? Our goal is to move towards permanent carbon removal in the future, following the Oxford Principles. Unfortunately, the share of removals (both nature-based and permanent) are less than 5% of the voluntary carbon market, which means that there is shortage of supply. Hopefully this will change in the future and we can increase the share of removals. Currently, the ratios are 40% avoided emissions, 40% nature-based removals and 20% innovative permanent carbon capture.

Is there a database or list where these abuses or inappropriate implementations can be found?

There isn’t a database, but community conflicts are often easily found through a brief desktop research. For instance, many community conflicts have been highlighted in scientific or media articles. 

Interested in learning more? Download the webinar recording.

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