By Pianpian Wang
Demands for voluntary carbon offsets have been increased since the beginning of the year. The pandemic has become a crucial driver for companies to commit to climate mitigation. We have received many inquiries recently regarding how to monetize carbon emissions. You might find this short article helpful in answering your general questions regarding the development of your own carbon credit project.
Make Your Project Development Cost-Effective
The primary factor to this question is project scale, since it is closely related to cost-effectiveness. Carbon credit project development requires upfront fees for consultation services (such as the development of project development documents), project registration, and carbon credit issuance. Project owners may recover these costs later in the carbon credit sales. If your project scale is relatively small (less than 10,000 metric tonnes CO2 reduction per year), the number of carbon credits generated from the project would be small as well. You might say, we can increase the unit price of each carbon credit to maintain and sustain the project, if the volume is small. However, such a relatively higher unit price would make your carbon credits less competitive.
That being said, if some projects are equipped with unique technologies to reduce carbon emissions, it would still be meaningful to convert such projects into carbon credit projects to promote these technologies.
The Ultimate Goal is to Reduce Carbon Emissions
One common misconception of carbon credit projects is that it is a tool to generate extra revenue streams. However, it is only one aspect of such projects. Regardless of whether your project is developed for compliance or voluntary markets, the ultimate purpose of monetizing
carbon credits is to provide an alternative to gather funding to develop a project that can reduce carbon emissions.
Generally speaking, a large portion of revenue generated from selling carbon credits should be allocated for project operations and other regular procedures required by the project registry to maintain the project’s certain qualification.
Not All Carbon Credits are Equal
Multiple factors come into play regarding setting the price of carbon credits, including but not limited to project location, project type, development standard, and associated social benefits. Therefore, when you put a price on your carbon credits, make sure these elements are properly considered. Some project registries, such as the Gold Standard, issue average pricing for each project type, which is a good source to help you set up a starting price.
If you checked the criteria listed above and are interested in learning more about project development, contact us today.