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3 Things to Consider When Assessing Nature-Based Carbon Projects

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The research is clear: Organizations that use material quantities of carbon credits to abate emissions they would otherwise not be able to reduce are decarbonizing at twice the rate of their peers. But the voluntary carbon market is not without its challenges and criticisms. One of the largest barriers companies cite for not purchasing carbon credits is the lack of transparency in how to judge their quality. 

As with any investment, diving into the carbon credit market requires careful scrutiny and thorough due diligence to ensure that your investment is both impactful and secure. 

In this blog post, we explore three essential questions to ask during the due diligence phase of investing in nature-based carbon credits to help you evaluate your investment’s viability, integrity, and potential, guiding you toward making informed and responsible decisions in this evolving market.

Checkpoint #1: Do you have a clear picture of the project area and context on who owns and has rights to the land?

Before investing in a nature-based carbon project, it’s important to verify land ownership and have a clear picture of the project area. 

Generally speaking, projects on land that have had a consistent owner for longer are less risky compared to owners who just acquired the land. Land with disputed or unclear ownership are at higher risk of being terminated or disrupted, which can affect the reliability of the carbon credits generated. The project developer must also have clear rights and permissions to implement the project activities, such as planting trees or installing renewable energy systems. Without legal ownership or proper agreements, the project could face legal challenges or be invalidated.

Many carbon projects, especially those involving forestry or soil carbon sequestration, require long-term commitments (25+ years). Ownership stability is crucial to ensure the project can continue without interruptions or disputes over land use.

Skipping this step comes with some serious risks. Projects on land with disputed or unclear ownership are at higher risk of being terminated or disrupted, which can affect the validity of the carbon credits generated.

Perhaps most importantly, respecting the rights and traditions of local communities, including indigenous peoples, is integral to a successful nature-based carbon project. Ask questions to ensure there has been an ongoing process of communication, with consent sought at key stages in process of the project development, in order to align with ethical standards, human rights and social responsibility. Reviewing the proper land ownership documentation ensures that the benefits of the project, such as financial returns or ecosystem services, are appropriately shared with the rightful landowners or local communities.

Checkpoint #2: Do you know how the project is additional?

The concept of additionally refers to the requirement that a carbon offset project must result in greenhouse gas (GHG) reductions that are additional to what would have happened in the absence of the project. It’s a defining concept of all carbon projects that assesses if the emissions reductions or removals of a carbon project would not have occurred without revenue from the sale of carbon credits.

Validating additionality is an essential check to ensure nature-based carbon projects genuinely contribute to reducing global GHG emissions beyond what would have occurred without the project, thereby supporting the overall goal of mitigating climate change.

Additionality ensures that the emission reductions are genuine, measurable, and verifiable. This accuracy is essential for credible carbon accounting and for businesses, governments, or individuals to claim they have offset their emissions legitimately.

Ensuring that nature-based carbon projects are additional is vital to maintain the environmental integrity of carbon markets. If a project would have happened anyway, without the incentive provided by carbon credits, then the credits do not represent real, additional emission reductions. This would undermine the effectiveness of carbon markets in reducing overall GHG emissions.

As the primary goal of carbon projects is to combat climate change by reducing or removing GHG emissions, additional projects contribute directly to this goal by providing real reductions that would not have otherwise occurred, thus making a tangible impact on climate mitigation efforts.

Checkpoint #3: Is it an avoidance or removal project and understand the baseline assumption?

The difference between avoidance and removal carbon credits lies in the nature of the emission reduction activities they represent. 

Avoidance carbon credits are generated by projects that prevent or avoid the release of greenhouse gasses (GHGs) into the atmosphere. These projects reduce the potential future emissions that would have occurred without the project. Types of nature-based avoidance carbon projects include REDD+ conservation projects that prevent deforestation and fund more efficient cookstoves.

Removal carbon credits are generated by projects that actively remove CO2 or other GHGs from the atmosphere and store them in a stable form. These projects result in a net reduction of atmospheric GHGs. Types of removal carbon projects include blue carbon restoration, biochar, and afforestation/reforestation projects.

While avoidance carbon credits focus on preventing additional emissions, removal carbon credits aim to reduce the current levels of atmospheric GHGs. Both types are integral to comprehensive climate action plans aimed at mitigating the effects of climate change.

With this in mind, validating the baseline assumption of a carbon project is an important due diligence step because it serves as the reference point against which the project’s emissions reductions are measured. Having an accurate assessment of the baseline emissions gives you a frame of reference, ensuring that the emission reductions claimed by the project are real, additional, and verifiable, which is essential for the integrity, credibility, and effectiveness of carbon offset mechanisms in combating climate change.

By carefully considering these aspects, companies can feel secure in supporting nature-based carbon projects that not only contribute to global decarbonization goals but also foster ecological and social resilience.

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