The Alternative That the Voluntary Carbon Market Needs at this Juncture
Why community-governed credit standards are key to carbon markets integrity
The British newspaper, The Guardian published an article on January 18, 2023, that raised concerns with elements of the methodologies used to calculate carbon dioxide reductions. Specifically, projects set up to cut emissions by avoiding deforestation and forest degradation, typically referred to as REDD+, on Verra, a legacy carbon credits registry in the voluntary carbon market. The article cites that “90% of rainforest offsets certified by the biggest carbon standard — Verra — are worthless”. REDD+ is one of the largest and most prominent types of carbon reduction projects used around the world as a part of the global effort to rein in growth in greenhouse gasses, and is endorsed by International Emissions Trading Association and International Carbon Reduction and Offset Alliance.
Since this publication, the team at Regen Network Development PBC has taken time to learn, listen, and read the comments of stakeholders and thought leaders, before formulating our own response.
In an economic system that fuels global warming by valueing timber, minerals, and agricultural commodities above the ecosystem services that living forests provide, we believe that working to conserve threatened forests, and thus biodiversity, is critical to keeping global warming below 1.5 degrees celsius.
Leveraging A Global Net Zero Goal
The Intergovernmental Panel on Climate Change’s sixth report highlights the important role that nature-based solutions can play in keeping us on track to meet the net-zero goal of the Paris Agreement. Achieving this goal requires the rapid expansion of carbon and ecological asset markets. Credit standard guidelines and organizations provide the science-based methodologies that drive quality, action, and supply within voluntary carbon markets. The scientific community is working hard to support the ongoing task of improving the calculations of carbon reductions, enhancing public trust and understanding, and raising the integrity and reliability of carbon credits.
We have to do as much as we can, as soon as we can.
It is generally accepted that in order to avoid the worst impacts of climate change we must, first, reduce emissions as much as we can, second remove as much CO2 from the atmosphere as we can, and third offset any remaining unavoidable carbon emissions. The voluntary carbon market and the standards that support it mobilize private action and investment — and can help us all reach the Paris climate goal.
Addressing the scientific critique of REDD+
The Guardian article cites scientific papers that take issue with highly technical elements of the methodologies used to determine the number of emission reductions to generate carbon credits and relies heavily on three scientific research papers, one of them not yet peer-reviewed. There are concerns about scientific debates being misunderstood and taken out of context by the Guardian journalists, and that the research used in this article was authored by journalists, not by scientific experts.
“The methodologies that govern carbon reduction calculations are constantly being reviewed and REDD+ has been updated multiple times to reflect changes and improvements in climate science and forest measurement. International bodies like the Integrity Council for Voluntary Carbon Market and the Voluntary Carbon Markets Integrity initiative are tasked with further improving the quality and integrity of carbon markets and the ways that they are marketed and used.” — IETA Guardian response
The internal science team at Regen Network reviewed the scientific literature cited in the Guardian article carefully. We found that, regarding whether there was a positive impact from the projects or not, it is hard to tell if the claims and credits sold are proportional to their real impact on the environment.
To better illustrate, there are two interrelated debates about the impacts of the projects. One is whether the projects had a positive or negative impact. For instance, the paper from Guizar-Coutiño et al.(2022) showed that from 40 projects they analyzed, a majority of the projects reduced deforestation and degradation. This could be seen as a success of REDD+ projects implementation. But there’s a deeper debate around whether the volume of credits produced by these projects has been inflated or not. It is in this regard that, for instance, the Guardian says only 6% of the projects are working as reported, and Sylvera says only about 30% of the REDD+ projects listed in Verra are high-quality projects in terms of MRV (i.e. not overestimating credits). As a response, Verra, in their last report suggests that The Guardian‘s analysis is based on a comparison of deforestation and degradation rates against the early-stage predictions of project developers, not the actual number of carbon credits issued by Verra, thus arriving at a wrong conclusion of overestimation of credits.
Unfortunately, we don’t have a way to analyze these assertions from The Guardian and Verra, as neither the data nor the methodology and calculations used by The Guardian journalists are yet disclosed. However, 3rd party curators, like Sylvera, called out from their own assessments that there is a large proportion of projects where there is a high risk of overestimation/inflation of baselines.
“These methodologies have been so flexible that anything goes,” said Eftimiya Salo, head of carbon projects at Compensate, a broker. “You could choose the best option to maximize your profit.”
The scientific debate on how to establish project baselines across all carbon market standards is varied and vibrant, thus no single universal baseline measurement approach is generally accepted as the best practice across the industry’s complex methodological approaches. At Regen Network, we strongly support the position that better monitoring, reporting, and verification approaches are necessary for project baseline measurements, which determine whether a project is eligible for the REDD+ program and how the number of credits issued to a project is calculated.
We created Regen Network because our team believes that open source, open science approaches, and public data are critical to allow for scientific innovation. As such, our team will watch carefully as additional scientific assessments are released from experts in the field over the next few months.
How does this critique tie to Regen Network?
Regen Network was incubated in 2017 as a response to the flaws of the current voluntary carbon market throughout its value chain. We believe that the VCM will play a key role in financing high-impact climate action.
At Regen Network, we believe in quality and integrity in the voluntary carbon market, that carbon markets need more scrutiny, and that ensuring scientific accuracy and credit quality will be increasingly important as more capital flows to fund ecological regeneration projects.
In the context of Regen Network’s current products, these REDD+ critiques affect our technological approach to the voluntary carbon market in these ways:
Regen Registry Guide
The Regen Registry Guide, which was adopted by community governance of the protocol via this proposal on 1–6–2022, which includes the acceptance of third-party programs, including Verified Carbon Standard (VCS) Registry (ie. Verra). This implies that credits issued by Verra standards can be issued, traded, and retired on the Regen Network blockchain, which includes the REDD+ program questioned in the Guardian article.
Nature Carbon Ton — A Toucan Protocol Credit on Regen Network
Nature Carbon Ton is a Toucan protocol pool standard for fungible carbon tokens (NCT) that represent digitized carbon credits from the Verra registry which were originally issued via nature-based methodologies, which include the REDD+ program questioned in the Guardian article. The NCT pool criteria can be viewed here, as well as the Toucan protocol response to this critique.
“The voluntary carbon market has flaws, but it is the most established tool we have to coordinate on financing climate solutions on a global scale.” — Toucan Protocol
Since 2022, Regen Network and Toucan protocol have been co-building a two-way bridge for NCT-eligible credits to be able to move from Polygon to Regen Network, in order to incubate a liquid carbon market in the Cosmos ecosystem on the Osmosis decentralized exchange. On the Regen Network blockchain, Toucan protocol will serve as the Credit Administrator, Credit Issuer, and standards decision-maker for all NCT Credit Class, leveraging the Regen Network core blockchain technology.
Digging into the projects behind Nature Carbon Tonne (NCT)
The team at Regen Network evaluated the projects that were tokenized onto the blockchain from Verra via the Toucan bridge, which are eligible for the NCT pool standard governed by Toucan.
In our analysis we found that:
- Of the 13 AFOLU (agriculture, forestry, and other land use) projects tokenized, only 6 were issued via the Verra REDD+ program — Florestal Santa Maria Project (Verra project 875), The Mai Ndombe REDD+ Project (Verra project 934), Pacajai REDD+ Project (Verra project 981), Cordillera Azul National Park REDD Project (Verra project 985), North Pikounda REDD+ Project (Verra project 1052), and REDD+ Project Resguardo Indigena Unificando Selva de Mataven (RIU SM) (Verra project 1566).
- Of these 6 projects, only two projects were included in the scientific studies referenced in the Guardian articles, Florestal Santa Maria Project (forest loss since baseline of 0.3%) and Pacajai REDD+ Project (forest loss since baseline of 0.4%). Four projects were not included in the analysis.
Since the forest loss at these projects is considered negligible, and because there is no additional data publicly available by which we can further analyze the quality of these projects' outcome claims, the team at Regen Network feels comfortable proceeding with including these projects in the NCT tokens that will be issued by Toucan protocol on the Regen Network blockchain. Without greater publicly available information, a challenge with the voluntary carbon market that blockchain technology addresses, we would be unable to provide a deeper analysis.
The Future of Global Carbon and Ecological Asset Markets — Regen Network’s Community Governed Ecological Credits Standards
In light of these discussions, it is important to highlight the ongoing evolution of the carbon markets on the blockchain, including the current wave of digitization of climate finance. This market evolution has been led by Regen Network, the first application-specific blockchain protocol designed to distinctly address the ongoing innovations of carbon and ecological credits standards generation and the use of digital technologies to create greater credibility and transparency for the voluntary carbon market. By digitizing carbon markets to improve monitoring, reporting, and verification, align stakeholder incentives, and disintermediate the value chain, we vastly improve the transparency and trustworthiness of the market. The faster this trend increases, the higher the chance that we can increase the carbon market industry’s reputation for quality and reliability in climate action.
Barbara Haya, the director of the Berkeley Carbon Trading Project says: “One strategy to improve the market is to show what the problems are and really force the registries to tighten up their rules so that the market could be trusted. We need an alternative process. The offset market is broken.”
Regen Registry is the alternative that the voluntary carbon market needs at this juncture.
Regen Network catalyzes climate impact finance by connecting investors, carbon buyers, and project developers to a growing pipeline of quality ecological impact projects seeking upfront financing for project implementation and certification. We search the globe for climate projects with the biggest potential for our growing pipeline of carbon-financed nature projects, from decentralized small-scale community projects to large-scale projects.
These high-quality ecological restoration projects utilize our innovative community-governed ecological credit standards system, Regen Registry, which allows scientific communities to design high-integrity methodologies and credit standards that monitor ecological regeneration for verifiable credits issued on Regen Marketplace. These nature-based solutions remove carbon, restore biodiversity, and reverse climate change. At Regen Network, we know that carbon and ecological scientific standards development is highly complex and nuanced. This has supported our approach to the 40+ methodologies and new credit standards emerging under the guidelines of Regen Registry.
“The social differentiation between Regen Network and the broader carbon market space revolves around ownership and governance. In the current voluntary carbon market, if the demand side owns the market, it will not be trusted. The supply side (land stewards and project developers) must control the standards, rules, and determine the credit price. At Regen Network, our community-governed standards process accomplished exactly that.”
- Gregory Landua, RND PBC
Our innovative, efficient, and transparent platform democratizes climate action across communities. Our architecture integrates credit standards development and market access, powered by the Regen Network blockchain — a transparent, global, decentralized technology platform, custom-built for global carbon accounting and ecological claims integrity.
Everything we do is in service to increasingly ambitious climate goals and the acceleration of a regenerative future. We unlock the value of stewardship by helping project developers optimize, demonstrate, and monetize their project’s impact, creating clarity, trust, and accountability for corporations and investors.
What’s on the horizon for Regen Network in 2023?
We look forward to supporting our growing network of ecological impact projects, including credits being designed by Kulshan Carbon Trust (biochar), Ruuts (holistically managed cattle grazing), ERA Brazil (biodiversity), Courageous Lands (agroforestry), Climate Farmers (regenerative land management), Ecometric (regenerative land management), UNDO (soil enhancement), Yakum (agroforestry, avoided deforestation), Open Earth Foundation (marine ecosystem preservation), and Impact Ag (regenerative grasslands management). We expect 2 million + credits to be issued on Regen Network in 2023, with up to 750 million credits by 2030 from our rapidly growing credit pipeline.
We invite you to join our discussions about community-governed carbon and ecological asset standards at Regen Network:
- Join the Regen Registry discussion led by Dr. Gisel Booman, head of science, on our Commonwealth forum
- Learn aboutRegen Registry basics
- Dig into the 40+ impactful credit standards under development, including oceans, grasslands, and keystone species health
- Peruse the 2M credits being issued in 2023 via our “credits lookbook”
- The Guardian article (original article): Revealed: more than 90% of rainforest carbon offsets by biggest provider are worthless, analysis shows
- Related Guardian articles from January 18–19 2023
- Shell to spend $450m on carbon offsetting as fears grow that credits may be worthless
- ‘Nowhere else to go’: forest communities of Alto Mayo, Peru, at centre of offsetting row
- The Carbon Con´s article
- Verra´s 1st response: Verra Response to Guardian Article on Carbon Offsets
- Verra’s 2nd response: Why Verra Supports REDD
- Everland´s response: The science behind the Guardian piece is fatally flawed
- Sylvera´s response: Sylvera response to The Guardian’s Analysis of Rainforest Offsets
- Toucan Protocol’s response: Carbon Markets need balanced scrutiny
- Climate Collective response thread
- IETA response: The importance of representing all voices when it comes to the climate
- Overstated carbon emission reductions from voluntary REDD+ projects in the Brazilian Amazon (2020, peer reviewed)
- A global evaluation of the effectiveness of voluntary REDD+ projects at reducing deforestation and degradation in the moist tropics (2022, peer reviewed)
- Action needed to make carbon offsets from tropical forest conservation work for climate change mitigation (2023, not yet peer reviewed, pdf can be downloaded from there)