Are you ready to dive into the world of carbon removal project verification and credit generation? Join us on this exciting journey as we explore the crucial steps and players involved in generating high-quality and trustworthy carbon removal credits.
During our CDR Basel event, we hosted a panel called "MRV (Monitoring, Reporting and Verification) and Standards as the Foundation of a Scalable CDR Market" and presented an ecosystem map, which sparked interesting conversations among the convened experts. We want to take this opportunity to dive deeper into the carbon removal project verification and credit generation pathway and broaden the conversation. We’ll highlight our perspective on the key steps and actors that must come into play, as well as the checks and balances that need to take place to generate high-quality and trustworthy credits.
The bigger picture: Carbon removal needs transparency and trust
Let’s first take a step back and remember why carbon dioxide removal (CDR) is necessary to face the climate crisis and why it is essential that the carbon removal credits sector is built with transparency and trust from the onset. Long-term carbon removal consists of capturing carbon from the atmosphere via biological and/or technical processes, handling and eventually sequestering it into a reservoir that is not quickly equilibrating with the atmosphere. The science is clear: if we want to maintain a livable environment for all and stay within the 1.5°C warming target set out in the UNFCCC Paris Agreement, we need to remove carbon from the atmosphere in addition to cutting our greenhouse gases emissions to a minimum, the first essential step which cannot be bypassed. We also know that certain industries will not be able to fully decarbonize and will need to compensate their hard to abate emissions with carbon removal credits to reach net zero emissions as set out by the Science Based Targets initiative SBTi, for instance. To reach climate-relevant impact through the carbon credit market, it is therefore essential to establish effective processes and frameworks. This will ensure that credits purchased by companies are actually achieving the carbon removal they claim and therefore advancing us in our collective goal of reaching net zero greenhouse gas emissions by 2050.
Carbon removal represents a new frontier in the carbon credit market, providing us with a unique opportunity to establish transparent and rigorously governed systems and processes from the outset. It is crucial to establish trust in this nascent industry from companies, policy makers, and the public, through the implementation of quality standards and robust frameworks, with proof-points along the credit generation journey. Our ultimate goal is to deliver measurable and verifiable environmental and social improvements that offer long-lasting benefits to the planet and its communities.
The carbon removal industry has the advantage of being able to learn from the pitfalls and shortcomings of the past decades of the voluntary carbon offset market, providing a unique perspective in avoiding such issues and establishing strong governance from the outset. One clear learning is that thorough monitoring protocols need to be in place to attest that the activities claimed, are indeed taking place and being measured. In addition to this, transparent and rigorous tracking is essential for carbon removal. Carbon removal approaches directly eliminate greenhouse gases from the atmosphere, with the aim of removing carbon for the long-term, for centuries or even millennia. Therefore, tracking and monitoring carbon flows in a transparent and rigorous manner is crucial to ensure real climate impact is achieved.
As we aim to scale CDR projects to climate-relevant impact through carbon markets, it is essential to have trustworthy products that companies can rely on to compensate for their residual emission. Recent public concerns over the past issuance of credits in the offsets market have created an environment of distrust in the Voluntary Carbon Market, leading to companies being fearful of greenwashing accusations and resulting in so-called ‘greenhushing’. Therefore, the focus needs to be on establishing quality standards and building trust through robust frameworks and appropriate checks, balances, and proof-points along the credit generation journey.
To foster innovation and fast scale-up, it is essential to avoid shortcuts and bypassing essential verification steps that may lead to over-promising or incorrect accounting. Different independent bodies need to intervene and interact in the journey to credit generation to ensure transparency and prevent perverse incentives for carbon removal credit accounting.
An ecosystem view: Understanding the various roles and responsibilities
As we explore what makes a trustworthy carbon removal credit, it is essential to understand the various actors involved in the credit generation journey. The diagram below presents an ecosystem view of the roles involved in creating the carbon removal credits, starting from CDR project initiation through third-party validation and verification to the issuance of credits on a Standard's registry, and finally delivering the carbon removal credit portfolios to buyers who can retire them for their individual corporate net-zero claims.
Understanding the roles and responsibilities of each actor is critical to collectively ensuring the integrity and credibility of the carbon removal credit market.
To begin, let's define what makes a high-quality carbon removal credit. It should be generated and accounted for, using a validated methodology under a recognized Standard that has undergone public consultation and development with various stakeholders. Additionally, it needs to be verified by a third-party entity (e.g. Validation and Verification body, VVB), accredited by the Standard and retired on a public registry to prevent double-counting and to record the climate action achieved.
On one end of this verification system are the project proponents or "Suppliers" in the diagram who carry out and measure the carbon removal activities. On the other end are the buyers who purchase the credits to offset their residual emissions and achieve net-zero status.
The process starts with a company or project that carries out a carbon removal activity that results in impactful climate action. The project monitoring generates data that proves the carbon removal achieved. In a nascent market, companies must establish trust in their processes, and certification and verification are necessary steps to generate carbon removal credits that other companies will confidently purchase.
In a traditional carbon credit project setup, the project developer and credit buyer only needed to work with the Standards and VVBs. However, for a more trustworthy and scalable system, a third-party is necessary: the provider of a dMRV (digital Monitoring, Reporting and Verification) system that adheres to the Standard and collaborates with all parties involved.
- The Standard-setting bodies, the entities that set the rules:
- Standards make the rules (i.e. through their standard guidelines and methodology documents) and oversee that they are followed correctly during the monitoring, reporting, credit issuance and retirement for claims. Standards are the controllers and keep quality high, they are crucial in helping prevent a race to the bottom in the market, where suppliers of carbon removals and/or buyers might gravitate towards what might be more convenient and lucrative. Standards must provide a thorough framework of rules and guardrails around what constitutes a carbon removal project and how the activities need to be monitored and reported. We do not see Standards as the ones connecting supply and demand of carbon removal credits: Standards must constitute a stringent regulatory framework, they add value to the market.
- Within the umbrella of a given Standard, there must also be a public Registry (i.e. public database) holding data about projects, the achieved removal credits, and details of their retirement. They usually operate in several countries and host several methodologies, hence don’t usually have the capacity to aggregate and manage granular project data themselves; while dMRV providers can specialize in carrying out these tasks.
- The Validation and Verification Bodies (VVB, also called verification authorities or auditors) are the entities that check that the rules are followed:
- The VVB first checks if a project plan fulfills all the requirements set out in a project documentation, which itself follows a methodology, including all requirements for the achievement of the purpose (validation). Then the VVB controls the compliance with the specifications regarding the achieved and reported carbon removal (verification) of a CDR project. In other words, they check that the claimed carbon removal from the atmosphere has actually happened, has been accounted for as set out by the methodology and that it has been monitored fully.
- The verification bodies themselves need to be accredited by Standards, who hold authority over the requirements, check that they have the capacity and right processes in place to thoroughly control the activities of the carbon removal projects.
- The entities responsible for managing the data trails and credit custody, the dMRV platforms:
- These platforms collect data from projects and can also pre-calculate the achieved removal. The data collected by the dMRV platform is made available to VVBs and Standards for certification and credit generation. The dMRV platform can also handle credit custody and request retirements of credits on the Standard’s registry to prevent double counting. It can serve as a single point of entry into multiple certification pathways and can aggregate different stakeholders involved in contracts. The goal of a dMRV system compared to the traditional setup of writing monitoring reports is two-fold: (i) data security and transparency, and (ii) decrease the effort in reporting and allow for automized processes, which reduces effort and increases speed and scaling possibilities.
Bottlenecks, bureaucracy and other hurdles - how to overcome them
Together, these entities constitute a robust and high-quality chain-of-custody for carbon removal credits and avoid perverse incentives for overestimating or double counting carbon removal claims. Each entity needs to specialize in what they can do best, but also have clearly streamlined and open communication channels. Ideally, they integrate seamlessly with each other.
The value of carbon markets is currently bottlenecked by the required level of bureaucracy in the procedures established by the Standards, as well as by the availability of auditors for the verification process. The presented verification pathways do already exist but are not easy to navigate for novel project developers or credit buyers and take too long.
The complex quality control framework is one of the greatest hurdles for emerging CDR companies and scaling the carbon removal credits market. The process for creating and adopting new methodologies for carbon removal approaches is a laborious one, and a real-time issuance process for carbon removal credits hasn't been established yet. While companies are emerging to cover parts of the credit journey, all independent stakeholders need to be present to create an impactful and trustworthy carbon removal credit.
Currently, we are witnessing a surge of innovation around carbon removal MRV and credit custody, with exciting and robust new approaches being proposed to increase transparency and cover different parts of the credit journey. As new players are innovating and specializing in different pieces of the puzzle, collaboration between different entities is essential.
We have a unique opportunity to implement systems to make the verification and credit issuance process more agile and streamlined with the daily operations of a CDR company. This is key to unlocking a fast yet trustworthy scale-up of the CDR industry through the generation of high-quality carbon removal credits.
Carbonfuture's solution to the industry's challenges
Carbonfuture offers a comprehensive solution to the challenges facing the carbon removal credit market. By combining dMRV and marketplace, Carbonfuture has streamlined the verification and credit issuance process, making it more efficient and accessible to all participants. This approach helps to establish a credible and trustworthy CDR industry based on the generation of high-quality carbon removal credits. It is essential in achieving our climate goals and addressing the climate crisis. We believe this provides the missing link needed to unlock the full potential of the CDR industry, enabling it to be truly climate-relevant and scalable.
Going further, we see a great opportunity to accelerate market uptake by developing a shared understanding of roles and models for the carbon removal value chain ecosystem. For this, we need to discuss the demarcations of responsibilities and data interfaces along the project-to-credit trail in detail. With all stakeholders along the carbon removal credit pathway, we will establish a common framework and define relevant parameters for the chain-of-custody lifecycle of carbon removals. This will ensure each actor can contribute to the monitoring, reporting, and verification at the most relevant point for their expertise and result in collaborative success.
Reach out to us to join the dialogue!