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Carbon Insetting: Who gets the credit? [Part 2 - Locking down the carbon].

Lets talk about Permanence and Buffers.

Welcome back to our carbon insetting journey! We’re diving into the world of carbon removal-based insetting, where companies partner with their supply chain to remove carbon (think tree planting or soil carbon programs), or undertake carbon removals on land they own and operate directly. This net Carbon Dioxide Equivalent (CO2e) removal helps reduce the company’s overall carbon footprint for the year.

Before we get into the nitty-gritty of permanence periods, buffers, and carbon storage integrity, let’s make sure we’re all on the same page. 

If you haven’t already, make sure you’ve read Part 1.

Recap: There are two pathways for carbon-removals to be used as part of a carbon insetting program:

  • Unaccredited = no creation and retirement of a carbon credit unit.

  • Accredited = creation and retirement of a verified carbon credit unit.

Meet Carglé: Our Fictional Company.

To make our discussion more practical, let’s introduce our fictional company, “Carglé”. A large multinational food corporation with global supply chains. 

Carglé is the kind of company we all wish was the norm! They have a science-based target for decarbonisation, and are working hard to reduce, inset AND offset emissions (Yes... all at the same time). 

They’ve made significant progress in avoiding emissions within their own business operations (direct reductions) and through their value chain (avoidance-based insetting).

Aware that direct decarbonisation takes time and may require new technologies, they’re also investing in nature-based carbon removal projects beyond their value chain (like biodiverse tree planting). 

This offsetting approach ensures they’re compensating for their carbon footprint while on the road to decarbonisation. They have a number of certified carbon neutral products in the market and strive to communicate openly and honestly with customers on their decarbonisation progress, and on the quality of carbon credits they purchase. What legends... Don't you wish all companies did the same?

As a next step, Carglé plans to implement a removals-based insetting program, where they work with farmers in their value chain to remove CO2e from the atmosphere and store it in soil and trees.

The Choice For Carglé: An Accredited or Unaccredited Insetting Program?

Under both pathways, they:

  • Pay for agronomic advice and practical training to help farmers implement farming practices that increase soil organic carbon.

  • Pay for selective tree planting on underutilised areas on the farmers’ land, or where trees can bring added value to farm productivity (shelterbelts, windbreaks, or wildlife corridors etc).

  • Implement a top-class monitoring, reporting, and verification (MRV) program.

  • Undertake an independent audit every 5 years to ensure program integrity.

  • Use the net carbon removals to reduce Carglé’s annual carbon footprint.

Option 1: Accredited Pathway. 

In the accredited pathway, Carglé designs the program to comply with the requirements of a globally credible carbon credit methodology (such as Verra Gold Standard Clean Energy Regulator ). Each year, the regulator awards a number of carbon credits to the program. These carbon credits are a financial product able to be traded.

  • Carglé receives 30% of the credits to compensate for incurred costs, with the remaining 70% going to the farmers.

  • Carglé can purchase additional credits from the farmers, but farmers are not obligated to sell exclusively to Carglé.

Option 2: Unaccredited Pathway. 

In the unaccredited pathway, they work with a third-party consulting company to quantify the net CO2e removal. This third-party may comply with a global standard such as ISO - International Organization for Standardization or the Greenhouse Gas Protocol (GHG Protocol) , and issue a “certificate” for each tonne of carbon sequestered.

  • Importantly, these are not tradable verified carbon credits. They can only be used by Carglé within their supply chain.

  • Farmers receive annual payments per hectare to incentivise changes in their practices.

The Concept of Permanence: Here today, gone tomorrow?

Permanence is the cornerstone of a credible carbon removal program. When someone pays for carbon removal (via a carbon credit), or when this removal is used as part of an environmental claim, we expect that carbon to stay stored for a long time, typically 25-100 years.

Imagine planting trees to offset emissions. Without proper verification and long term monitoring, who ensures those trees survive forest fires, pests, or even changes in land management practices?

Permanence = obligation to maintain and store carbon for a period of time. 

Notably, there are emerging technologies coming to market that may be able to play a role in long-term monitoring of carbon storage (under an accredited OR unaccredited carbon removal pathway). Examples include Regrow AgFLINTproCibo Labs Pty LtdFarmLabDownforce Technologies, and many many others. 

Permanence: Is it an ironclad guarantee under the accredited pathway? 

The regulator’s job is to ensure compliance with this obligation for the permanence period defined in the methodology (usually 25 or 100 years). If carbon is lost due to the actions of the farmer (or associated party), they would be required to purchase and retire another carbon credit unit to compensate for the loss.

Under the ACCU Scheme in Australia, the Clean Energy Regulator has significant legal powers to ensure compliance. The permanence obligation can be affixed to the title of the land, and will transfer with a property sale. 

This means that via an accredited pathway, consumers (purchasing carbon neutral products) or third-party buyers of carbon credits can be confident that the long term storage of the carbon is being monitored and reversals will be accounted for.

Though of course it wouldn't be possible to claim that this approach is perfect. All regulators will have their limits. The question at this point must be, is this more of a guarantee than the alternative? 

Permanence: The achilles heel of an unaccredited insetting program.

Both the Science Based Targets initiative FLAG Guidance and the DRAFT Greenhouse Gas Protocol (GHG Protocol) Forestry, land use, and removals guidance require that if you intend to make any claims in relation to carbon-removals as part of your decarbonisation targets or carbon accounts, that you need to demonstrate a long-term plan for how you will monitor the permanence of carbon storage.

The mechanisms for doing this are flexible and the duration of this monitoring is not defined. If at any time there is a reversal even (carbon leakage), or the company can no longer monitor the project area, they must record a carbon loss in their carbon accounts for the current year. 

But will the Greenhouse Gas Protocol (GHG Protocol) or Science Based Targets initiative have any legal "teeth" to be able to enforce permanence obligations? 

  • Do they have the resources to follow (for 25 or 100 years) all projects from all the companies who have made environmental claims using unaccredited carbon-removals?

  • What happens if a company uses unaccredited carbon removals to make carbon neutral claims for 5 years (receiving a market benefit), then stops monitoring the carbon storage and stops using the Global GHG protocol?

Buffers: A safety net for carbon storage.

Verified carbon credit programs also apply buffers, where they withhold a portion of the calculated carbon credits, to account for any calculation errors or carbon leakage over time (in aggregate). This is like an insurance policy for carbon storage.

Buffers = a portion of credits held in reserve, as insurance for carbon losses.

All major international carbon credit programs have similar assurances to guard against over-crediting.

  • It is unclear how the unaccredited approach will apply buffers, 

  • it seems that the approach is flexible and open to the company suggesting an appropriate approach.

  • But how can the average consumer be sure that an unaccredited insetting program has chosen an approach with high integrity? 

Ratings agencies: Comparing apples with apples.

Given the global pressure on greenwashing, a number of independent ratings agencies are starting to emerge. Examples include SylveraBeZero CarbonRenosterCalyx Global and more emerging every day. These agencies review carbon credit methodologies and carbon projects to provide independent ratings(for example AAA, AA, A, BBB, BB etc).

This is much the same as the way Moody's or Standard and Poor's provide finance ratings for investments. 

This saves the average consumer, or carbon credit buyer, from being a carbon methodology expert and having to trawl through thousands of pages of methodology information, and to individually evaluate project level performance. 

It means they can easy compare the integrity of one carbon credit compared to another. 

  • These ratings will almost certainly apply to any methodology chosen for the accredited carbon insetting program.

  • It is unlikely that it will ever be practical for unaccredited carbon insetting programs to receive these kinds of ratings (the variation from project-to-project would be huge).

  • Though I am happy to be proven wrong on this one!

The Conclusion for Carglé? 

At this point, the risk around long-term permanence and buffer pools of unaccredited carbon removal programs seems too great

The easier solution for all parties is to adopt a verified carbon credit unit as part of the carbon insetting program.

It is hard to see how most unaccredited carbon removal programs can stand up to increasingly stringent global integrity expectations for long-term carbon storage.

It is feasible to think that very large and vertically integrated global agri-food companies (like Carglé) may be able to deploy long-term solutions to solve this challenge (outside of carbon regulators).

  • Though it would require radical data transparency and deep trust from consumers.

  • It would also require a high level of confidence from the agri-food company itself that the long-term storage can be maintained (and monitoring programs can be funded for 25-100 years), to ensure that directors are not held liable for greenwashing.

  • For smaller scale farmers, deploying a custom MRV solution is unlikely to be feasible (currently). Meaning if they choose to engage in an unaccredited carbon removal program, they are beholden to the downstream supply chain partner (Carglé).

It is hard to see the value consumers receive from an unaccredited insetting program. 

  • How will they be guarded against the risk of long-term permanence obligations being dishonoured? 

  • Without them needing to individually follow a raft of different monitoring and accountability systems.

  • These programs are also unlikely to have easy to follow independent ratings

For our fictional company Carglé, it feels that the safe choice is to stick to the verified program. Noting that it may mean they don’t get full control of the carbon, it may cost them more, and they have to share the credits with the farmers.

Stay tuned for Part 3, where we dig into issues around Additionality and the risk of farmers getting locked out of future carbon farming opportunities. It wont be one to miss!


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