Are additionality and permanence the right principles for high integrity credits?
This is the latest part of a series of articles that outline the Carbon A List’s perspective on the carbon offset market. For full context start below.
- Part 1: Do it, prove it, sell it: my evolving views on carbon accounting
- Part 2: What does an ecosystem service cost?
- Part 3: Framework for designing quality assets
- Part 4: How to use the offset industry to get out of offsetting: letter to John
This article is an expansion to a comment we submitted to the Integrity Council for the Voluntary Carbon Market. For context, we believe these markets are one piece of the funding necessary to drive more mitigation action. Even if they aren’t used at scale, the mechanics and thought processes to estimate and quantify various impacts can be useful in other domains that do not, strictly speaking, create an instrument that gives voluntary permission to an emitter of fossil carbon to claim carbon neutrality. However, given the numerous failures since the emergence of carbon markets ranging from human rights abuses, cancellation of projects when forestry and mining interests appear, systematically over crediting, and use as “carbonwashing” or manipulation to doctor environmental, social, governance data, it is especially important to place them in proper context. We believe that compliance markets, inset markets, procurement decisions, business intelligence, green bonds, risk assessments and more can leverage similar structures envisioned for similar environmental data reporting that might serve the offset market.
We are answering the question: are these the right principles? Please see this AirTable to review a full list of principles and suggested Core Carbon Principles. We make the case for why additionality and permanence are not and offer justification to consider “interoperability” as a principle.
We applaud the efforts of the ICVCM to set the threshold for new advancements to make more trustworthy voluntary carbon markets. However, we believe, as designed, this framework will not generally increase trust from otherwise objective stakeholders. We provide both constructive criticism and opportunities to increase trust and usability.
Challenges presented by this framework
Financial additionality is not linked with reality
We believe that financial additionality for crediting environmental activity should not apply. While financial additionality can be more easily satisfied by industrial activities that permanently remove carbon from the atmosphere, the inclusion of this clause is inconsistent with the reality faced by foods, fuels, and fibers producers. In the truest sense, “would this have occurred, if not but for the payment” forces a producer of a credit to not be able to make a claim unless they can prove that it wouldn’t have been profitable. This rule unwittingly penalizes those who are already profitable in their operation, to be unable to participate in continued or enhanced action of delivering climate action. In effect, this rule only provides partial or suboptimal support from an environmental good that can be backed by robust and transparent accounting. Moreover, this rule creates artificial counterfactuals for only part of one project, simply to create an approved project, and discounts the ability to track the outcome from other activities that are already causing climate impact, and are profitable. At worst, this disconnects from critical data connected to business intelligence for the producer of that credit to adopt more environmental interventions.
High risk of carbon myopia and inconsistent silos
By placing a carbon value on land based systems without taking into account water, biodiversity, social dynamics, and ecosystem services more broadly, projects seeking to generate credits under this framework are at risk of creating carbon tunnel vision. There is often a tradeoff between fast growing carbon stocks and a highly biodiverse and resilient area. In areas experiencing drought exacerbated by a warming climate, water is also an increasingly important concern for many projects.
Inconsistent quantification of project area boundaries occurs on two counts. First, when the method selected to establish baselines uses proprietary algorithms, or is unable to take into account better methods for carbon estimation. Second, on the fact that the only quantifiable metric used for offsets is carbon, thereby neglecting related information from other societal and ecological indicators across those project area boundaries.
True permanence is not possible on nature based solutions
Carbon as an element moves through a system. Natural cycles affect the persistence or residence time of the carbon in any sink. Current methodologies for nature based solutions assume a 100 year time for sequestration but the payment is for a shorter period of time. This means that people are only paid for delivering permanence for a portion of when it’s possible.
Establish flexible frameworks for multiple high integrity asset classes
We believe that the voluntary carbon markets can become a valuable innovation sandbox for collecting and distributing funding for acting on climate. We do not think that they should only be developed for balancing fossil carbon emissions, but can go beyond as a structure that accurately quantifies, and rewards climate positive activity. Moving beyond permanence, and financial additionality, voluntary carbon offset markets could simply create ways to reward actors who are reducing, retaining, or removing carbon. Actors able to retain carbon can be rewarded for both their retention and accrual, and funding through carbon market structures can be used as catalytic finance to more efficient ways to produce foods, fuels, and fibers.
Include data interoperability as a principle to drive greater climate impact
Instead of approving siloed tools in bespoke processes, voluntary carbon markets could create standards around trusted databases, and support core data standards and parameters for tools selected for explicit opportunities for interoperability and compatibility. This could ensure greater apples to apples comparisons and work toward consistency for scope 1, 2, and 3 accounting. Moreover, this data has linkages to supply procurement decisions, business intelligence at the project and enterprise level, insets, and other forms of catalytic finance. As the monitoring, reporting, and verification (MRV) industry increasingly digitizes, this presents an opportunity to ensure truly accurate data that has uses for other purposes. This will have an added value of producing lower cost, and more accurate MRV system.