By Chris McLaren

Introduction

In previous blog posts, we’ve presented evidence that higher quality projects tend to command higher credit prices on the Voluntary Carbon Market (VCM), and that the market is projected to grow at least 25% year over year through 2032. 

While even more-enthusiastic VCM growth forecasts exist, they tend to presume the market will quickly overcome its current “Lemon’s Market” problems thanks to the many authoritative voices that have recently sought to articulate what constitutes quality in a carbon project. 

While we are somewhat reluctant to embrace these rosier growth forecasts, it is fair to note that today’s credit buyers, project proponents, technical consultancies and investors do indeed have a raft of authoritative new guidance at hand with which to design, manage and evaluate carbon projects. Emanating from an array of entities ranging from registries and NGOs, to nonprofits, national governments, and carbon credit ratings systems, these various organizations have sought to clarify what constitutes offset project quality in the name of improving market dynamics, which in turn is widely seen as critical to achieving market growth. 

For those seeking to deliver quality projects, however, the prospect of deciphering and summarizing this new guidance can be a bit daunting. Practitioners and other stakeholders could clearly benefit from a synthesis of these important voices to guide them as they seek to deliver project quality. 

In this post, we seek to do just that. We profile and summarize guidance from the most authoritative voices articulating the facets of carbon project quality today, and conclude with a synthesis of their overall guidance.

Notable organizations we studied

• MSCI: Provides a holistic project quality assessment, incorporating emissions impact integrity, implementation integrity, and usage integrity. Their rating is based on an inverse weighting of several criteria, emphasizing additionality, permanence, co-benefits, legal and ethical considerations, and delivery risks. They use a balanced weighting system, but users can customize it to reflect their desired emphases.
  
  
• BeZero Carbon: Focuses primarily on credit efficacy (how likely is the 1 tonne CO2 reduction to actually be a 1 tonne reduction?), along with aspects such as additionality, permanence and carbon accounting. They create a standardized model that must be maintained for projects to enable scoring, emphasizing data accuracy and consistency across projects. Their assessment involves comparing the data referenced against the project and verifying the accuracy of details within project documents. They investigate project claims and flag discrepancies between those claims and ex-ante forecasts, identifying the drivers of change to assure the data feeding assumptions are correct. 
  
  
• Sylvera: Provides ratings based on carbon efficacy, additionality, and permanence. They also separately assess co-benefits, which is not included in their overall rating. Inverse weighting is used, ensuring that a high score in one sub-criterion cannot offset a low score in another. This system is more localized to project type. They provide scores based on credit efficacy, measuring co-benefits separately.
  
  
• Calyx Global: Considers carbon efficacy and co-benefit quality separately, presenting both scores.
  
  
• Symbiosis: A corporate “Buyer’s Club” with Google, Meta, Salesforce, and Microsoft as core members, Symbiosis builds on existing standards, aligning with the IC-VCM Core Carbon Principles. They emphasize conservative accounting, durability, social and community benefits, ecological integrity, and transparency. They maintain agricultural production, applying an appropriate discount based on peer-reviewed science to eliminate the effect of leakage (this means that when trying to measure the environmental benefits of a land-use change project such as reforestation, they ensure that local agricultural production is not significantly disrupted by the project, and they adjust the calculated environmental benefits downward to account for potential “leakage” effects, where a project might simply shift environmental impacts to another area instead of truly reducing them overall).
  
  
• Verra: Their ABACUS label uses a dynamic performance benchmark that tracks carbon stock changes in statistically matched controls throughout a project’s lifetime. They emphasize carbon accounting methods that eliminate the effect of leakage.
  
  
• Microsoft: Offers a buyer’s guide with criteria categorized as “must” (minimum viable project characteristics) or “should” (ideal project characteristics) across additionality, permanence, leakage, and social benefits. They stress the use of conservative baselines, consistent quantification, and transparently reported data. They emphasize ensuring additionality, durable carbon storage, and reducing leakage. They also have a common framework for determining what constitutes a best-in-class project.

Synthesized requirements for quality

• Additionality: All organizations studied emphasize the importance of additionality, meaning the project’s impacts would not have happened without carbon finance. However, the methods for demonstrating this vary; some focus on financial attractiveness and market penetration, while others look at legal requirements and barriers to entry. BeZero Carbon is particularly strict regarding this criteria.
  
  
• Permanence: All organizations highlight the importance of ensuring the carbon reductions or removals are long-lasting. Methods for demonstrating permanence range from risk mitigation strategies (buffer pools, etc.) to robust monitoring plans and model validation. MSCI‘s approach incorporates a compensation mechanism based on the risk of mitigation, adjusting the maximum score immediately if evidence of non-permanence exists.
  

• Leakage: BeZero Carbon and Microsoft explicitly address the risk of leakage (emissions shifting to other areas), requiring demonstration of methods to mitigate or avoid it. MSCI and others also acknowledge this risk, but it’s less prominently featured. Symbiosis emphasizes maintaining agricultural production to eliminate leakage.
  
  
• Carbon Accounting: Most organizations stress the importance of accurate and conservative accounting methods that use robust methodologies and data inputs. BeZero Carbon implements a standardized model for this.
  
  
• Co-benefits: Sylvera and MSCI explicitly assess co-benefits (i.e., all types of positive social or environmental impacts beyond carbon removal), although Sylvera does this separately from its efficacy ratings. Symbiosis and Microsoft also stress the importance of co-benefits, but with less detail than Sylvera and MSCI. BeZero Carbon considers these to some extent, mentioning potential for biodiversity or social effects as part of credit quality.
  
  
• Legal and Ethical Considerations: MSCI and Symbiosis both directly assess legal and ethical considerations, including stakeholder engagement. Other organizations imply the importance of these aspects.
  
  
• Transparency and Data Quality: All organizations stress the importance of transparent and reliable data, employing robust MRV (monitoring, reporting, and verification) and using standardized methodologies. BeZero Carbon and Sylvera emphasize the need for easily accessible data.

Synthesis of Guidance for Project Proponents and Stakeholders

Based on our analysis, project proponents hoping to attract high-quality buyers and secure higher prices for their carbon credits should focus on demonstrating the following:

1. Strong Additionality: Clearly show that the project would not have happened without carbon finance. Quantify the financial benefits of carbon credits, address barriers to entry, and demonstrate that the project’s activities aren’t merely common practice or legally mandated.

2. High Permanence: Demonstrate that the project’s carbon reductions/removals are durable and long-lasting. This involves robust mitigation strategies (buffer pools, etc.), detailed monitoring and verification plans, conservative assumptions, and transparent reporting.

3. Minimal Leakage: Employ strategies to prevent or mitigate leakage (emissions shifting to other areas) and demonstrate this through transparent and verifiable data.

4. Accurate and Transparent Carbon Accounting: Use conservative methods, scientifically sound data, robust methodologies, and transparently documented assumptions.

5. Substantial Co-benefits: Document and quantify positive social and/or environmental outcomes beyond carbon removal. These could include biodiversity impacts, community benefits, etc.

6. Legal and Ethical Compliance: Ensure all legal and ethical considerations are addressed, including stakeholder engagement and transparent governance.

7. Data Integrity and Transparency: Focus on precise, reliable, scientifically valid, timely, usable, and shareable data. Invest in efficient data management systems, and ensure compliance with reporting requirements. Secure your data appropriately.

In summary, demonstrating high quality in nature-based solutions projects necessitates a comprehensive and transparent approach, accounting for multiple factors beyond merely the carbon impact of projects. The organizations identified provide a range of assessment methods, each with its own nuances; however, a consistent theme across all is a focus on robust data, transparency, and rigorous methodologies.

Demonstrating integrity 

To be seen as high quality, it is clear that projects’ data integrity, methodologies, and process integrity must be self-evidently strong. If the foundational data for a credit is flawed, even a perfect process cannot fix it; conversely, if a credit has excellent data but the process of verifying or handling it is opaque, unclear, unreliable, or inefficient, the market will find it difficult to match this quality credit with buyers who are ready to pay a premium.

Without effective and affordable tech solutions, the challenge for project proponents of monitoring, reporting, and verifying performance to the level demanded can be cost-prohibitive: in fact, this study reveals that MRV expenses can amount to 20 to 30 percent of projects’ total credit revenue.

Given the twin market challenge of credit scarcity and credit integrity/trust, we see the need for a technological solution built to enable complete data integrity and transparency, empowering project developers and local communities to develop high-quality projects more quickly and cost-effectively.

How Impact Inside can help

Built with integrated data management to collect and store relevant data points to measure additionality, quantification, permanence, and co-benefits in one centralized location, Impact Inside is built to help objectively improve project quality. Our SaaS platform allows carbon project proponents, investors and technical service providers to work from the same plan, and unveil to the market projects’ true story, using objective and transparent information.