A new groundbreaking investigation into Verra, the world’s leading carbon standard for the rapidly growing voluntary offsets market, undertaken by the Guardian, Die Zeit and SourceMaterial, revealed that “based on analysis of a significant percentage of the projects, more than 90% of their rainforest offset credits – among the most commonly used by companies – are likely to be ‘phantom credits’ and do not represent genuine carbon reductions.” While Verra has strongly contested the findings, it has, however, caused a stir in the carbon trading market and has raised significant concerns for companies relying on offsets as part of their net-zero strategies.
Read our blog to learn more about carbon credits and its role in reducing carbon footprints.
Factors Dampening the Carbon Market
While the carbon market holds tremendous potential to bring down emissions and meet the targets stipulated by the Paris Agreement, its success has been limited due to the scepticism surrounding the credibility of carbon credits.
Discussing the reliability of forest carbon credits in a recent post, Aijing Li, Raymong Song and Caroline Ott stated, “…The voluntary carbon market (VCM) has a critical role to play in reducing and removing emissions from the atmosphere — but only if it can overcome widespread skepticism and accusations of greenwashing. On the supply side, the market faces mistrust around the quality of carbon credits. On the demand side, many are questioning whether large corporations — including those in the fossil fuel industry — are using carbon credits to avoid reducing their own emissions.”
These apprehensions arise from a range of factors, primarily the lack of transparency in the carbon market, which has raised questions regarding the environmental integrity of offset projects. Apart from allowing scam credits to populate the market, the lack of transparency poses other challenges as well, such as in pricing carbon credits. The pricing challenge is further complicated as carbon markets are fragmented and unregulated. The associated lack of standardization in processes has thus limited harmonization efforts in carbon pricing, making it difficult for buyers to know if they are buying offsets at a fair price.
Learn more about the challenges plaguing the carbon market in our blog “Introduction to Voluntary Carbon Markets.”
Another detrimental factor is the challenges in measuring the impact of carbon offset projects. The conventional monitoring, reporting and verification processes are primarily manual in nature and often leads to delays and costly errors. The inability to measure and track the impact of sequestration projects has also led to phantom forests (deliberately and accidentally) and provided space for companies to greenwash their initiatives.
Abhilasha Purwar, CEO, Blue Sky Analytics, believes that "Measuring the impact of something intangible always presents a challenge. The current system to measure, report, and verify emission reductions is imperfect and mired in challenges. A major limitation in the monitoring and performance metrics of carbon sequestration projects today is to do with data. To effectively monitor and verify the impact of carbon credits, there is thus a pressing need for transparent and verifiable data."
Driving Credibility with Technology
The rapid growth of technology holds tremendous potential to enhance the credibility of carbon offset projects. In this regard, the expansion of the Digital Measurement, Reporting, and Verification system promises to be a game changer. Digital MRV refers to the use of digital technologies to monitor, report, and verify the results of greenhouse gas (GHG) emissions reduction or mitigation activities. It involves the use of digital tools, such as satellites, sensors, internet of things (IoT) devices, data analytics, and blockchain, to collect and analyze data on GHG emissions.
Building Trust Through Satellite Data
Satellites play a crucial role in Digital MRV systems as they can provide independent, high-resolution data that can be used to monitor and track the implementation of emissions reduction measures. By providing detailed information on these activities, satellite data can capture the impact of emissions reduction measures.
Further, satellite data can help carbon project developers and verifiers in calculating the four essential factors that define the quality of carbon credits, namely:
Baseline: Satellite data can play an important role in helping carbon offset projects establish accurate baselines- which is the estimated level of emissions that would have occurred in the absence of a carbon offset project. By providing a more independent and reliable source of information for establishing a baseline, satellite data reduces the subjectivity and potential for bias that may be present in other methods of baseline determination. This can increase the credibility and reliability of carbon offset programs and help ensure that emissions reductions are accurately measured and credited.
Additionality: A key principle of carbon offset programs, additionality refers to the requirement that the emissions reductions must be a result of the offset project and not something that would have occurred anyway. Satellites can provide data on land use and land cover changes, which can be used to monitor the implementation of carbon offset projects and ensure that they are indeed resulting in additional emissions reductions. With the help of Earth observation technologies, baselines can be more frequently assessed and updated. These technologies also allow for post-implementation assessments of additionality based on actual changes that have taken place on the ground.
Leakages: Leakages occur when a project leads to an increase in emissions beyond its boundaries. Defining the area impacted by leakage, also known as the "leakage belt," has proven to be a difficult task. So far, a variety of methods and sources of data have been used to determine the leakage belt, including self-reporting. This level of subjectivity has made it challenging for project developers to gather data and for third-party organizations to verify leakage assessments. Satellites offer a solution to this challenge by providing consistent and impartial data sources that can be used to establish a unified method for leakage assessment.
Durability: Durability refers to the ability of a carbon offset project to sustain its emissions reductions over the long term. This is a critical factor in the success of carbon offset projects, as it helps to ensure that the reductions achieved are permanent. Satellites can provide continuous monitoring of land use and land cover changes, including changes in deforestation and forest degradation patterns. This data can be used to monitor the implementation of carbon offset projects and to detect any changes that may indicate a decline in the project's durability. In addition, satellite data can be used to support the implementation of sustainable land use practices, such as reforestation or agroforestry, which can help to ensure the long-term durability of carbon offset projects.
Thus, by providing verifiable data, satellites ensure the credibility of carbon offsets and helps to build trust in the carbon market.
Explore the Multi-Billion Dollar Market with Blue Sky Carbon Intelligence
The carbon offset market is growing rapidly, having been estimated to reach $100 billion a year by 2050. Previously, challenges with traditional monitoring, reporting, and verification (MRV) methods hindered wider market participation, but advancements in Digital MRV systems are revolutionising the way carbon offset projects are monitored and evaluated. This has opened up the avenue for market growth by enhancing transparency and credibility.
We at Blue Sky Analytics are excited to unlock the potential of this market with the release of the first version of our carbon sequestration dataset. With the help of satellite data, AI and cloud-based solutions, our dataset monitors land-based carbon sequestration and quantifies sequestered carbon. We use satellite data to estimate the amount of carbon stored in forests by considering factors such as the type of trees, their size, and other forest characteristics, such as canopy height, the density of vegetation, and the species of trees. With sophisticated machine learning models, we process these vast reams of data and get sound carbon estimates.
With our dataset, you can measure the impact of carbon offset projects at all scales, from small agri-farm level projects to large reforestation initiatives. We can monitor the impact across large geographical areas such as states and even an entire country!
We are committed to improving the versions of this dataset over time, adding SAR data and high-resolution satellite data from private players. This dataset is a building block in our vision to build the world’s largest spatially and temporally continuous datasets on key environmental parameters and transform the monitoring, diligence and risk assessment systems in India and globally. Inspired by the remarkable work done by companies such as Pachama and Sylvera, we are motivated to scale up geospatial solutions that can accelerate the adoption of sustainable practices.