Carbon offsets are the transaction instrument of the voluntary carbon market. Carbon projects generate a carbon credit for each tonne of CO2 equivalent captured or avoided by the project activities. Carbon credits are a great mechanism to support these projects over a long period of time as the sale of these credits generate a steady source of revenue over the lifetime of the project.
While the global economy has to shift to a low-carbon model, today more than ever, global greenhouse gas (GHG) emissions are still increasing. Even with the most aggressive decarbonization plans, a significant amount of GHG emissions are still unavoidable. Offsetting can help mitigate these unavoidable emissions from our daily lives by supporting projects that avoid or capture CO2 all over the world. Carbon offsetting is one of the tools we have to avoid global temperatures increasing more than 1.5C. Through carbon offsetting, we can support many critical climate mitigation initiatives such as reforestation and forest conservation efforts, renewable energy projects in developing countries, and the provision of clean and efficient cooking options to rural communities across the world, to name a few. These activities play a key role in the fight against climate change.
Additionally, carbon offsetting projects often have positive social, economic, and environmental impacts by restoring ecosystems and supporting local (and often marginalized) communities.
We accept and invest in projects that issue carbon credits from American Carbon Registry (ACR), Climate Action Reserve (CAR), Gold Standard (GS), or Verified Carbon Standard (VCS). These standards have been vetted and accepted by International Carbon Reduction and Offset Alliance (ICROA) and Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) for their rigor and reliability to verify high-quality carbon credits. We collaborate with partners to evaluate the different standards and work with the one that has a methodology most aligned with the envisioned project activities.
Developing a high-quality carbon project is an arduous process. Depending on the project type it can take from 12-18 months to 5-7 years to complete! Different programs have different processes, but generally these are the steps needed to develop a carbon project(
- Develop a project concept note—the project developer drafts a high-level description of the project activities
- Conduct a pre-feasibility study—a technical consultant works with the project developer to assess estimated project costs, emissions reductions, and methodologies the project can follow
- Conduct a feasibility study—a technical consultant works with the project developer to create a budget, timelines, and work plan
- Develop a project design document (PDD)—often with the assistance of a technical consultant, the project developer writes the PDD to explain the project implementation approach, monitoring plan, and project impacts
- List the project—the selected standard lists the project in the standard’s registry including project location and type, as well as the submitted PDD
- Validate the PDD—a third-party validation body evaluates whether the project will in fact generate carbon credits from the project activities under the selected methodology
- Implementation, monitoring, and reporting of the project—the project developer implements project activities, monitors and measures the impact of project activities, and reports their findings
- Verify the project—a third-party auditor reviews the monitoring report, conducts site visits, and provides a verification report to the appropriate standard. This report includes final calculations of the project’s emission reductions reflecting the conclusions from their audit
- Issue credits—the certification body (owner of the carbon standard) reviews the monitoring and verification report and determines the total volume of credits to be issued to the project. Each credit issued receives a unique serial number to ensure there is no double counting.
In some cases, these steps can be undertaken in different orders or in parallel, except for verification and issuance.
We’re involved throughout the lifecycle of carbon projects and our role changes depending on the project’s needs. Predominantly we finance the development of projects from ideation and implementation, and sell forward credits from the projects in which we invest to organizations that have a demand for high-quality credits to achieve net zero or fulfill other climate ambitions.
We may also be an offtaker (i.e. buyer) of future credits, or purchase credits on the spot market (i.e. immediately available) once the credits have already been issued. For long-term financed projects, we remain closely engaged with project partners and continue to support implementation, monitoring, reporting, and verification activities.
Co-benefits are additional positive impacts from the project activities outside of carbon avoidance or capture and are often aligned with the Sustainable Development Goals set by the UN. These co-benefits can range from biodiversity protection from a forest conservation project to health benefits from an efficient cookstove project.
Additionality means that the emission reductions from the project are above and beyond what otherwise would have occurred without the additional financing provided for the purpose of carbon crediting, are not legally required, and are above and beyond regional and sectoral common practices.
Permanence means that the GHG mitigation resulting from the project is on a long enough timescale so as to be considered permanently abated or removed.
During the project design process, project developers and technical consultants evaluate the different risks the project faces throughout its lifetime. These risks can include natural risks, financial risks, socio-political risks, and other external risks. Once these risks are identified, the project will design and implement mitigation measures to minimize the potential impacts of these risks. For nature-based carbon sequestration projects, these risks inform a calculated risk profile for the project and assign a percentage of credits to go to the buffer pool maintained by the carbon standard (i.e. carbon credit issuer/registry). If there is damage to the project, the standard can use the credits in the buffer pool to make up for the difference. We’ll then work with the project partner to determine the appropriate steps to take to restore the project or identify mitigation mechanisms for any future risks.
Reforestation projects plant and grow trees, capturing carbon from the atmosphere as they grow and mature. Forest conservation projects protect forests in danger of deforestation. They earn carbon credits by avoiding the emissions associated with cutting down forests.
Every carbon project site looks different. Some habitat restoration or conservation sites are high up in the mountains, in tropical rainforests, or along the coast in tidal wetland ecosystems. Our agroforestry and regenerative agriculture projects are in fertile farmlands and grasslands in countries across the globe. Our fuel-efficient cookstove projects are often in communities near forested areas where fuelwood collection can threaten forests. When communities utilize fuel-efficient cookstoves, deforestation pressures decrease.
We’ve developed an industry-leading set of standards and benchmarks to assess the quality, rigor, and legitimacy we require of all projects and carbon credits within our Carbon Program, going well beyond current accepted industry criteria for high-quality carbon credits.
We do that by consolidating the best thinking from regulators, environmental NGOs, task forces, and think tanks — along with our own team members, who have decades of cumulative experience in carbon markets and nature-based solutions at organizations like Climate Action Reserve, ClimateSeed, Natural Strategies, IFAW, Wildlife Conservation Network, BloombergNEF, Goldman Sachs, and Engie Impact.
Our stringent requirements don’t stop at carbon reduction or removal, either. We assess every project’s impact on natural resources, ecosystems, biodiversity, and social well-being, and put in place robust monitoring tools to ensure projects achieve the best possible outcomes for people and the planet.
Engaging local communities is essential for any project’s success. We work with our project partners to ensure that communities are part of the process from initial scoping to project design, to ongoing implementation. Communities are actively engaged in projects through participation in:
- Free, prior, and informed consent
- Governance and leadership positions
- Active implementation of project activities
- Providing community input and feedback on project progress and challenges
- Management of carbon financing benefit or profit sharing mechanisms
- Conducting site monitoring and protection activities
- Volunteering and educational awareness raising
We employ a four-part monitoring strategy to ensure our carbon projects achieve maximum climate, environmental, and socioeconomic impact. The four components of our monitoring strategy are:
- Collaborate with project partners to ensure a robust climate, environmental, and socioeconomic indicator data collection and analysis process is occurring at the site level and shared with Catona Climate. This includes vegetation growth and survival rates, carbon biomass and sequestration, agricultural production, biodiversity levels, community income generation, and more;
- Utilize geospatial data and remote sensing to track vegetation changes, carbon biomass estimates, and threat detection across all sites in our portfolio;
- Conduct annual site visits to project sites to evaluate progress and outcomes, as well as identify any challenges, speak with community members engaged in the project, and assess the overall project management and monitoring practices at each site; and
- Utilize third-party auditors to assess all carbon offset projects against the relevant carbon registry standard and provide reports to the project developer and Catona Climate with key findings and recommendations for action.
For carbon projects we have invested in for forward offtake, yes, we do! Conducting site visits is a critical component of our monitoring strategy and is essential to ensure our projects are achieving climate, environmental, and socioeconomic outcomes. We visit project sites annually to meet with our project partners, evaluate project progress, understand any risks or challenges facing projects, assess overall project management, and offer guidance and support in project design, implementation, and monitoring.