“The climate emergency is a race we are losing, but it is a race we can win”, António Guterres, the Secretary-General of the United Nations, inspiringly stated at the 2019 Climate Action Summit. This optimism stems from the development of innovative approaches that are strengthening the fight against climate change. One of the promising mechanisms in this regard is carbon offsets. Also referred to as carbon credits, they allow an entity (e.g., an individual, company, or government) to offset its GHG emissions by funding equivalent emissions reductions in another location or sector. The value of carbon credits is elucidated in a study that shows that by the end of 2019, the market had achieved over 608 million tonnes of CO2 in emission reductions or removals. This is equivalent to taking over 131 million cars off the road for a year!
Learn more about carbon credits and how they help companies meet their decarbonisation goals in our blog.
Due to its ability to lower emissions and support net-zero goals, carbon credits have gained prominence in recent years, with a growing number of companies that are caught in a bind between maintaining profitability and satisfying regulations turning towards carbon offsets. In 2021, the worldwide voluntary carbon market was worth $2,004.85 million and is projected to experience significant growth in the coming years. However, the development of the carbon market is at risk of slowing down due to the skepticisms surrounding the reliability of carbon credits.
Challenges in Traditional MRV Methods
These concerns stem from a range of factors, primarily from the opaque nature of the carbon market. The absence of transparency is linked to the limitations in the current MRV techniques employed.
Effective carbon credits are driven by credible MRV methods, however, the traditional MRV methods used today are saddled with challenges. These include:
High Cost: Traditional MRV methods often involve on-the-ground measurements and monitoring, which can require significant resources, personnel, and specialised training and equipment, resulting in high costs.
Not Conducive to Exchange-Traded Markets:
Factors such as high transaction costs, lack of standardisation, verification challenges, and limited scalability owed to the limitations in traditional MRV methods hinder the development of exchange-traded markets. This poses risks of reducing the overall demand for carbon offsets and slowing down decarbonisation targets.
Traditional MRV methods, such as manual data collection and paper-based reporting, face challenges of high latency. For example, manual data collection methods may involve delays in the collection and transfer of data between different stakeholders, such as the project owner, verifier, and registry. These delays can lead to increased transaction costs, reduced transparency, and lower data quality.
Inadequate Consistency and Accuracy: The lack of standardisation can make it difficult to compare results across projects and can lead to inconsistencies in data collection and reporting. Further, ensuring that data used for the MRV process is accurate, complete and transparent is challenging due to the lack of accessibility to credible and high-quality data.
Challenges in verification: Ensuring the validity of emissions data, the success of emissions reduction projects, avoiding duplication in reporting, and confirming that the emissions reductions are permanent and genuine are some of the difficulties faced in verifying carbon credits due to inefficient monitoring infrastructures and lack of credible and high-quality data.
Time intensive: Traditional methods of MRV can be time-consuming because they often involve manual data collection, which can be a labour-intensive process. For example, manual data collection for a project that involves planting and monitoring trees to sequester carbon would require personnel to physically count and measure trees and record the data.
Apart from impacting the quality of measurement, reporting and verification of carbon offset projects, the limitations in MRV methods result in a range of challenges. This includes mismanagement of projects, lack of transparency in the market and pricing difficulties. It has also allowed space for the proliferation of scam credits in the market and the creation of phantom forests (both intentionally and unintentionally).
Emergence of Digital Measurement, Reporting, and Verification
In conjunction with the rapid growth of technology, the lookout to minimise challenges has paved the way for digital solutions. This has led to the emergence of Digital Measurement, Reporting, and Verification. Digital MRV is a multi-step process that enables the measurement of emissions reduction by a mitigation activity and reporting this information to relevant stakeholders, who can verify and certify the results, allowing for the issuance of carbon credits. Some of the technologies used for Digital MRV include satellites, cloud computing, artificial intelligence and IoT, among others.
Digital MRV holds tremendous potential to enhance the credibility of carbon offset projects. Recognising this potential, stakeholders have been exploring digital technologies to bridge the trust deficit in the carbon markets. For example, in February 2022, Google.org Charitable Giving committed $1 million to the Gold Standard (GS) to find digital solutions for carbon markets. Later in the same year, Verra and Pachama also introduced a pilot digital MRV project for nature-based solutions. By enabling the MRV processes with technology, the credibility of carbon markets is being ascertained.
Enhancing Carbon Markets with Satellite-driven MRV
The advancement of satellite technology has revolutionized the climate action sector.
Former US Vice-President Al Gore pithily summed up the impact of advances in satellite and computer analysis in the fight against climate change at the COP26 summit when he stated, “That changes everything.”
Today, satellites equipped with remote sensing technology can provide valuable data on carbon sequestration in forests, wetlands, and other ecosystems, which can be used to monitor and verify carbon credits. The use of satellite technology enables the monitoring of large areas in a cost-effective and efficient manner, which can dramatically accelerate investments in nature. In this regard, the most remarkable impacts satellite technology can have on the carbon market are listed below:
Transparency: Satellite data can help improve transparency in carbon markets by providing objective, accurate and timely information on carbon emissions and sequestration, as well as on land use changes. This information can be used to verify emissions reductions and removals claimed by participants in the carbon credits market, thereby increasing the credibility of carbon credits transactions. In turn, this can help increase confidence in the market and boost investment in carbon credits projects.
Accountability: By providing transparent and verifiable information on the impact of offset projects, satellite data is helpful in holding institutions accountable for their climate targets and prevents the rampant greenwashing practised across the sector today.
Meet international reporting requirements: Satellite data enables companies to keep track of real-time carbon reductions over time, helping them meet international reporting requirements and improve their ESG ratings.
Lowers costs and saves time: By incorporating satellite data into the verification process, it becomes possible to quickly and accurately assess changes in emissions and sequestration levels. This enhances the way data is collected and can cut costs and time associated with issuing new credits.
Support the development of new projects: Satellite data can support the development of new carbon offset projects by providing data on land use and deforestation patterns, enabling the identification of areas suitable for reforestation and afforestation activities. This can also help lower the costs and time required to develop new carbon offset projects.
Unlock the Potential of Carbon Markets with Blue Sky Carbon Intelligence
As geospatial technology takes on a bigger role in promoting the carbon market, we at Blue Sky Analytics are excited to be a part of this process with the introduction of our new carbon sequestration dataset. With the help of satellite data, AI and cloud-based solutions, we monitor land-based carbon sequestration and quantifies sequestered carbon. Currently, at the first version, this dataset was developed with the objective to make carbon markets more transparent, reliable and accessible, which can spur growth in the sustainable finance sector.
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!
Whether you're a:
a company looking to verify the legitimacy of a project's claims
State government looking to harvest carbon credits from your forests
Project developer looking for appropriate sites for new carbon offset initiatives or track the advancement of existing projects
Credit registry that wants to improve the integration of satellite mapping into credit allocation
Verification body that wants to check if the projects are delivering what is claimed
Our dataset offers you scalable and cost-effective solutions that can ensure additionality, minimize leakages and help measure the impact of your carbon offset initiatives.
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 globally.