How Can Companies Identify High-Quality Carbon Credits?

How Can Companies Identify Carbon Projects That Meet Quality Criteria?

In the global fight against climate change, carbon credits have emerged as a crucial tool for businesses striving to offset their hard-to-abate emissions. However, not all carbon credits are created equal. As companies increasingly turn to carbon offsetting as part of their sustainability strategies, understanding what makes a carbon credit high-quality has become more important than ever.

Content List

1. Carbon Credits: A Growing Market Under Scrutiny
2. AVID+ vs. Core Carbon Principles: A Comparison
   • 2.1 AVID+ Framework
   • 2.2 Core Carbon Principles (CCP)
3. The Future of High-Quality Carbon Credits
4. Conclusion

1. Carbon Credits: A Growing Market Under Scrutiny

The voluntary carbon market has experienced explosive growth in recent years. With over 130 countries pledging to achieve net-zero emissions and more than 9000 companies setting net-zero targets, the demand for carbon credits is skyrocketing. The voluntary carbon market has more than quadrupled in size since 2020, reaching nearly $2 billion in 2021. Projections suggest it could grow to $10-40 billion by 2030. However, this surge in interest has brought  increased scrutiny to the quality of carbon credits. Key areas of concern include additionality, permanence, double counting, overestimation, and greenwashing. To address these concerns, two frameworks have emerged as benchmarks for assessing carbon credit quality: the AVID+ framework, developed by Professor John Sterman of MIT, and the Core Carbon Principles (CCP), introduced by the Integrity Council for the Voluntary Carbon Market (ICVCM).

2. AVID+ vs. Core Carbon Principles: A Comparison

Both the AVID+ framework and the Core Carbon Principles aim to ensure the quality of carbon credits, but they approach this task slightly differently.

2.1 AVID+ Framework:

The AVID+ framework, developed by Professor John Sterman of MIT Sloan, serves as a rigorous standard for evaluating the quality of carbon credits. It focuses on five key principles, each addressing critical aspects of carbon offset integrity:

Additionality: The core idea of additionality is that the emission reductions or removals credited would not have occurred without the specific carbon credit project. A project must prove that the emissions reduced or avoided are above and beyond what would happen under a "business-as-usual" scenario. For example, protecting a forest is only additional if there is a real threat of deforestation. If the forest is already protected by law or another entity, then the carbon credits claimed from its preservation are not truly additional.

Verifiability:Emissions reductions or removals must be measurable, reportable, and verifiable. The project must be backed by data and methodologies that are transparent and independently verifiable. For example, if a project claims to reduce emissions through improved cookstoves in rural areas, there must be reliable data showing the stoves were delivered, are being used, and have led to measurable reductions in emissions compared to traditional methods.

Immediacy:The AVID+ framework emphasizes the need for projects to provide near-term carbon reductions, given the urgency of the climate crisis. Projects that offer potential reductions in the future (e.g., planting trees that will mature in decades) are considered less impactful in the short term. For example, while reforestation projects are valuable, they do not offer immediate climate benefits compared to renewable energy projects that displace fossil fuels immediately.

Durability:Durability refers to the permanence of carbon sequestration or avoidance. Carbon credits should represent reductions that are sustained over the long term, ideally matching the timescale of carbon dioxide's persistence in the atmosphere, which can be hundreds of years. For example, sequestration in trees is not as durable as geological storage due to the risks of wildfires, disease, or deforestation. Credits derived from projects with higher permanence, such as biochar or direct air capture with geological storage, are therefore favored.

+ (Plus):The "Plus" in AVID+ requires projects to deliver additional co-benefits beyond carbon reductions. These benefits can include social, economic, and environmental improvements such as poverty reduction, enhanced biodiversity, job creation, and community health. For example, a project that not only reduces emissions but also provides clean water access, education, or health services to local communities embodies the "Plus" principle.

The AVID+ framework stands out from other standards due to its strong focus on immediacy and the concept of multisolvency—providing multiple benefits beyond just carbon reduction. Professor Sterman highlights the importance of acting quickly, emphasizing that "there's a time value of carbon: emissions released today have an immediate impact on climate change." This urgency in addressing emissions now, rather than in the distant future, is a key differentiator of the AVID+ approach.

2.2 Core Carbon Principles (CCP)

The Core Carbon Principles (CCP), established by the Integrity Council for the Voluntary Carbon Market (ICVCM), provide a structured set of standards designed to enhance and harmonize the quality of carbon credits within the voluntary carbon market. The CCPs are built on three foundational pillars: Governance, Emissions Impact, and Sustainable Development.

A. Governance

• Effective Governance: The program issuing carbon credits must have robust governance mechanisms to guarantee transparency, accountability, and continuous enhancement, thereby maintaining the overall quality of the carbon credits.
• Tracking: A registry system should be in place to securely and uniquely identify, record, and track all mitigation activities and the issuance of carbon credits. This ensures that each credit can be clearly and securely traced.
• Transparency: The program must offer comprehensive and accessible information on all credited mitigation activities. This data should be publicly available in digital form and understandable to a general audience, enabling thorough scrutiny of the activities.
• Robust Independent Validation and Verification: There should be strict requirements for independent third-party validation and verification of the mitigation activities at the program level to ensure the credibility of the carbon credits.

B. Emissions Impact

• Additionality: Like the AVID+ framework, the CCPs demand that credited emission reductions or removals must be additional. This means that the project should prove that, without the carbon credit revenue, the reductions or removals would not have taken place. For instance, a project capturing methane from landfill sites must show that this effort would not be economically feasible without the support from carbon credits.
• Permanence: Emission reductions or removals should be permanent. If there is a risk of reversal, there must be strategies in place to manage and mitigate those risks and to compensate for any reversals that occur.
• Robust Quantification: Emission reductions or removals should be measured using conservative and scientifically sound methodologies, ensuring they are comprehensive and accurate.
• No Double Counting: Reductions or removals must not be counted more than once toward any mitigation goals. This principle covers avoiding double issuance, double claiming, and double use of the credits.

C. Sustainable Development

• Sustainable Development Benefits and Safeguards: The program should include clear guidelines, tools, and compliance procedures to ensure that mitigation activities adhere to or exceed established social and environmental safeguards, providing positive contributions to sustainable development.
• Contribution Toward Net Zero Transition: Mitigation activities must avoid committing to levels of GHG emissions, technologies, or carbon-intensive practices that conflict with the long-term goal of achieving net zero GHG emissions by mid-century.

The CCPs are designed to set a high standard for carbon credits, ensuring they generate tangible, measurable, and lasting climate benefits. By offering a clear and consistent set of criteria, the CCPs help businesses and investors support projects that make a genuine contribution to global climate objectives.

3. Why High-Quality Carbon Credits Matter for Businesses

For businesses aiming to offset difficult-to-reduce emissions, investing in high-quality carbon credits is essential for several reasons:

• Credibility and Reputation: As corporate climate actions come under greater scrutiny, companies must ensure their offsetting efforts are genuine and effective. Using low-quality credits can lead to accusations of greenwashing, which can damage a company's reputation.
• Real Climate Impact: High-quality credits guarantee that a company's investment is genuinely contributing to climate change mitigation, aligning with broader sustainability goals.
• Risk Management: Poor-quality credits may be reversed or invalidated in the future, potentially exposing a company to reputational and financial risks.
• Regulatory Compliance: As carbon markets evolve, regulations are likely to become stricter. Investing in high-quality credits now can help businesses stay ahead of future regulatory requirements.
• Stakeholder Expectations: Investors, customers, and employees increasingly expect businesses to take meaningful climate action. High-quality carbon credits demonstrate a serious commitment to sustainability.

4. The Future of High-Quality Carbon Credits

As the voluntary carbon market continues to mature, we can anticipate several key developments:

• Increased Standardization: Frameworks like AVID+ and CCP are likely to converge, providing clearer guidelines for defining and recognizing high-quality credits.
• Technological Advancements: Improvements in monitoring and verification technologies, such as satellite imagery and blockchain, will enhance the credibility and traceability of carbon credits.
• Focus on Removals: While avoidance credits currently dominate (about 80% of supply), removal credits are expected to comprise 35% of the market by 2030. This shift reflects the growing acknowledgment that we need to actively remove CO₂ from the atmosphere, not just avoid additional emissions.
• Integration with Corporate Strategy: Companies will increasingly view carbon credits not just as offsets but as strategic investments in climate solutions that align with their broader sustainability objectives.

5. Conclusion

As we strive toward a net-zero future, high-quality carbon credits will play a crucial role in offsetting hard-to-abate emissions. For businesses, investing in these credits is not just about meeting a requirement—it’s about making a real, verifiable contribution to climate change mitigation. By understanding what defines a high-quality carbon credit and staying informed about frameworks like AVID+ and CCP, businesses can ensure their offsetting efforts are credible, effective, and aligned with stakeholder expectations. As Professor Sterman reminds us, "There's a time value of carbon." The time to act—with integrity—is now.

Interested in carbon credits? Take action today by investing in high-quality carbon credits that drive real social and environmental impact. Explore how our carbon credits can help you achieve your sustainability goals safely. Contact us now to learn more and start your journey toward a net-zero future. The time to act—with integrity—is now.