An Intro-What to Know Before Developing a Carbon Credit Project

By Shannon Mora

Have you ever considered ways to earn money from your sustainability practices? Perhaps you have a sizable forest land that you wish to earn extra revenues from. Given the known high carbon sequestration ability of your plant species, you may consider developing a carbon credit project.

Carbon financing is a great way to support and reward innovators who implement carbon-reducing activities. You can have your activity certified to issue carbon credits, a tradable commodity, for your efforts to reduce or avoid the release of carbon emissions into the atmosphere. Each tonne you are able to systematically and scientifically prove to reduce or avoid, creates one credit that can then be sold to companies or individuals interested in taking climate action. However, it can be difficult to understand the process of development. This article is intended to offer a general understanding of what you should initially consider.

Where Do You Begin?

Ultimately, your first step is to assess the feasibility of your project. You need to ask yourself, does my project activity produce true, measurable, and additional reductions? Is my project located in an appropriate location? Does my project fit best into a regulatory or a voluntary offset market? Is there a methodology in place to calculate my emission reductions?

Carbon Credit Project Qualifications

As a project developer, you must determine the qualification requirements for your project activity. Basic requirements include scale and proof of additionality. Scale is to say that your activity is large enough to contribute a considerable difference in emission reductions and additionality means that the reductions caused by your activity are additional to what would have taken place in a “business as usual” scenario. For example, forest land undeniably sequesters carbon emissions. However, it is safe to assume that the amount of sequestered carbon would remain the same under a scenario where the trees do not experience the threat of logging. Now, if the same land was intended to be converted into a grazing pasture that required all of the trees to be cut, then the sequestered carbon would be released. In this case, the project activity would be preventing deforestation.

There are two important elements here to recognize regarding additionality. First, the example project activity is considered additional because the developer is preventing the release of emissions that otherwise would have entered the atmosphere. Secondly, the project is reliant on carbon financing (revenue returns from credit sales) to implement the project activity rather than selecting the deforestation alternative. Without these two elements, the project activity could not be considered to be additional.

Carbon Credit Revenue Potential

There are many ways you can finance your carbon projects through government grants, NGO’s, and private foundations. You can also rely on the returns from retailing credits. The market prices for credits depends on a number of factors: the project industry, the type of market, project location, and co-benefits.

There are two types of markets: compliance and voluntary. Compliance markets are in place as a tool to service those required under law to lower their carbon footprint. The guidelines set forth in this article are geared towards projects in a voluntary market, which are to serve individuals and companies interested in doing their part to combat climate change and reduce their emissions voluntarily.

Co-benefits refer to the additional social benefits that a project has on their surrounding communities, a large contributing factor to credit pricing. These positive externalities include providing job security that otherwise wouldn’t exist, providing energy sources to remote areas, facilitating education opportunities, ensuring clean breathing air, and so on. Companies and individuals tend to select projects that host co-benefits that align with their personal ethos or philanthropies. The more relatable and impactful your project is on socio-economic fronts, the more popular or attractive your project will be for buyers.

Standards and Methods

You are going to need to select a standard body with which your project activity will be certified under. There are a number of different standard bodies that serve to ensure that registered projects have true, measurable, and additional emission reductions. Each standard serves specific project locations and has approved certain methodologies for calculating the reductions of various activities. Project activities fall under different industry titles including forestry, renewable energy, transportation, agriculture, waste management, and more. Once you have identified what your project activity is, where it will be located, and which market you wish to enter, you can narrow down your options for Standard selection.

The methodologies for each Standard provide tools, equations, and guidelines for calculating emissions. Selecting the most appropriate method is the beginning of your project process and will lay out the technical requirements you will be expected to meet. If a methodology does not yet exist for your activity, it is always possible to develop your own.

How can we help?

CCC serves as project consultants, helping you to navigate the development process and bridge communications between developers and the Standards. We typically kick-off the development process with a diligence report to cover each of these initial qualification factors. This report provides the foundation for project development prior to sinking premature costs as it outlines the expectations of the certification process.

If you are interested in receiving a comprehensive diligence report to kick-start your development process, or wish to know more information about the steps to certification, please don’t hesitate to contact us.