How to choose high-impact carbon credits

How to choose high-impact carbon credits

If you are new to navigating the carbon credits market, it may seem like a complex and confusing space. When buying carbon credits for the first time, we notice that a lot of companies simply get overwhelmed, and don’t know where to start.

Buyers can choose from nature-based projects such as reforestation and regenerative agriculture, projects that target carbon removal via solutions such as biochar and advanced rock weathering, and projects that tackle the non- CO₂ gases polluting our environment.

Given the wide range of options for first-time carbon credit buyers to evaluate, there are a few basic principles that can set businesses on the right path. In this blog, we’ll outline some of the most important considerations for your first carbon credit purchase.

But first things first: What are carbon credits, and how are they used?

Carbon credits can stand in for the carbon emissions reductions that the purchasing entity is not fully able to make themselves. Companies should not think of carbon credits as a substitute for decarbonization, but rather as a bridge or a building block on their decarbonization journey. Enacting strong sustainability plans can take time, and for companies that are committed to making immediate impact while also working on longer term strategies for reducing their carbon footprint, carbon credits can help. Your first carbon credit purchase is not only a procurement decision, but also a signal that your company takes near-term climate action seriously.

Why buy carbon credits now?

High-quality credits can help companies to meet their near-term goals. By utilizing carbon markets, they can pick up pace to meet targets aligned with the Paris Agreement, delivering the measurable impact that stakeholders and customers are increasingly demanding.

According to research from Accenture, only one in five companies are on track to reach net zero emissions in their operations by 2050.

Source: Accenture

Critically, when it comes to climate pledges that need to be fulfilled by 2030, there’s no time to waste. The companies that wait until 2028 or 2029 to explore carbon credits will face a fundamentally different market: higher prices, limited supply of premium credits, and intense competition for the highest-quality offsets. 

Choosing carbon credits

Not all carbon credits are created equal. Methodologies for projects that produce carbon credits can range wildly, as can the cost of purchasing the credits, and the overall climate impact and co-benefits. High-integrity projects are measurable and verifiable. By prioritizing such projects, buyers can access quality carbon credits.

Here are some factors to consider when assessing projects:

  • Additionality

    The project must be “additional”, which is to say, it would not have happened if it were not for this project developer generating carbon credit revenue. If a project would have occurred anyway, the carbon credits it generates aren't truly offsetting anything.

  • Accurate measurement

    The emission reductions must be quantified using high-integrity measurement, using a conservative approach to avoid overestimation. This means taking care not to inflate the emissions that the project addresses.

  • Permanence

    The emission reductions from the projects that generate carbon credits must be irreversible. For plenty of project types, reversals are highly unlikely or even impossible, while other projects may carry a greater risk of some of the mitigated carbon being emitted later.

The case for selecting superpollutant projects

Superpollutants include gases like methane, nitrous oxide, and industrial refrigerants such as CFCs and HFCs. Even in small quantities, they have an outsized impact.

While CO₂ remains the largest contributor to climate change overall, superpollutants are responsible for nearly half of the warming we are experiencing right now, and they can be reduced quickly using proven solutions.

Carbon credits generated from superpollutant mitigation projects have major advantages for first-time buyers. They deliver immediate climate benefit, with tangible impact that is simple to explain. And, due to the additionality, permanence, and strong measurability offered by these projects, they are among the highest-integrity credits available, and at a reasonable cost. 

Despite their potential to deliver fast-acting progress and critical long-term impact, superpollutant solutions receive only a fraction of the capital flows in the global voluntary carbon market compared to engineered carbon solutions like Direct Air Capture (DAC) and Carbon Capture and Storage (CCS). While CCS is growing, it can only be applied in a fraction of power plants  and large industrial facilities. Meanwhile, DAC could one day help with addressing large amounts of CO₂from smaller and distributed sources, but for now, broad application is nascent, and credits are expensive. In a blog published earlier this year, Sylvera reported that the average price for DAC carbon credits was over $500. This hefty price tag puts this credit type well out of reach for many smaller buyers.

The key takeaway? While some new technologies to capture CO₂ seem promising, it might take years to reach the ubiquity required to deliver a steady supply of low-cost, high-integrity credits. For the years immediately ahead, channeling capital into proven superpollutant solutions would drive faster, more substantial progress when it’s needed most, and offer affordable, impactful credits to companies looking to make their first carbon credits purchase.

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