Demand for forest carbon credits is growing rapidly as organizations around the world strive to meet climate goals in alignment with the IPCC target of net zero emissions by 2050. We need more quality forest carbon projects to meet that demand, draw carbon out of the atmosphere, and mitigate climate change. But creating a high-quality carbon credit is no simple process. Following today’s methodologies for creating projects that meet principles of additionality and verifiability can be expensive and complex. It can take 2–5 years and hundreds of thousands of dollars (or more!) to take a forest project from a concept to a real project that is beginning to recoup costs through the sale of carbon credits.

Supporters of forest carbon projects are sometimes surprised by the effort required to create quality credits. We’ll explore the process behind creating a forest carbon credit today and how Pachama is working to make the process more efficient using technology.

What are carbon credits and how do they work?

Carbon credits are a financing mechanism designed to provide funding for projects that reduce or remove greenhouse gas emissions beyond what would happen otherwise under business-as-usual conditions. Each carbon credit represents one tonne of CO2 equivalent removed, reduced, or avoided, that can be bought, sold, or traded. Before carbon credits can be sold, the project originating them must be planned, developed, and approved for listing in accordance with a protocol from a carbon registry that will then audit the carbon benefits of the project.

Read on to learn more about how it works.

Today’s forest carbon credit creation process

Step 1 — Feasibility assessment and project planning

1–2 years

The first step for landowners or stakeholders who want to create a forest carbon project is to evaluate whether a carbon project is feasible and compatible with the long-term goals for the property. To do this today, they must identify a protocol from one of the carbon registries and ensure that they will be able to meet its requirements for demonstrating that the carbon benefits will be permanent and additional to what would have happened without the project.

Today, these protocols consist of an extensive set of rules around how carbon can be quantified and what checks must occur. In addition, project proponents must also plan how the property will be managed to provide carbon benefits, estimate the volume and value of carbon credits that may be produced, and perform long-term financial planning to determine the economic feasibility of the project.

Step 2 — Project development

1–2 years

Once the project proponents have determined that the project is feasible, they must develop it in accordance with the protocol they have chosen. In addition to listing the project with the chosen registry and submitting a management plan, project developers must also quantify the amount of carbon credits that the project will produce and prepare 100+ page scientifically rigorous reports that can be used to register credits. To quantify carbon credits, project proponents often send foresters into the field to measure trees in sample plots by hand. Finally, the project must be verified by a registry-approved third party, who will review the project documentation and fly to location to conduct a site visit, where they will sometimes re-measure trees by hand.

Step 3 — Project registration

1–7 months

 

When project development and verification are complete, the project proponents submit their documents to the registry which will review them and issue credits. For voluntary carbon markets, registration only takes about a month, but for compliance markets like California’s Cap and Trade market, where carbon credits can be purchased to help companies meet regulatory requirements, the registry process may take 6–7 months.

Step 4 — Project Verification and Monitoring

Even after a project has been created and the first carbon credits have been issued, the project must still be monitored and verified on a regular basis. Projects are only eligible to receive carbon credits after these verifications are completed. As more carbon benefits are verified over time, the project may issue additional carbon credits, provided that the credits still meet the protocol requirements for permanence and additionality.

Voluntary carbon registries have different requirements for the frequency of ongoing monitoring, reporting and verification. While some registries require projects to submit annual monitoring reports, others require a monitoring report only when a project is seeking new credit issuances. The same is true for third party verification requirements. Some registries may require onsite verification every 7 years where verifiers visit the project and manually measure the trees on site, while other registries do not have a required verification frequency.

Step 5 — Credit Issuance, sale, and retirement

After third-party verifiers complete their verification, project proponents must submit all information to the registry to receive credits. Depending on the registry, project proponents may pay a fee for these credits. Once the project has credits issued, buyers can purchase carbon credits to offset their emissions. When an organization purchases a carbon credit, the carbon credit is “retired” in the organization’s name, meaning that the carbon benefit has been used to offset their emissions and cannot be sold again.

Buyers may wonder where the funds from their credits go. Some of the money goes towards paying back loans and losses for all of the verification and documentation work that went into creating the project in the first place!

Beyond that, projects use carbon financing for different purposes based on the type of forest project. Projects that prevent deforestation often use carbon financing to hire surveillance teams that protect the forest. They may also invest in tools, facilities, and training that help local communities create economic opportunities that keep the forest intact. By contrast, reforestation projects use carbon financing to pay for the care and planting of seedlings, as well as ongoing maintenance as the trees grow.

Technology can make the carbon credit creation process more efficient

Great forest carbon projects take substantial work to ensure they support their local communities, perform good forest management, and bring high integrity credits to market. Today, that process requires sometimes intensive resources.

Here at Pachama, we’re harnessing technology to make it easier to go through that process. Using satellite imagery with machine learning, we can measure carbon stored in forests more quickly and efficiently compared to traditional methods.

This technology enables us to assess many projects around the world so that we can highlight those projects that are following quality principles and doing great work. Our satellite data also allows us to conduct frequent monitoring, giving buyers more visibility into the carbon storage performance of projects over time

Beyond helping to highlight great projects today, Pachama is working to accelerate the creation of new projects. Many landowners and communities want to create forest projects, but struggle to afford high project creation and verification costs. That’s why Pachama is working on a new remote sensing-based approach to make the process faster, more transparent, and more affordable. We’re beginning our first pilot projects in the Atlantic Forest of Brazil and plan to bring these tools to other regions in the future.

Given the scale and urgency of the climate crisis, it’s vital to invest in solutions that work. If your company is considering purchasing carbon credits to meet carbon neutrality goals, you’ll want to purchase carbon credits from projects that are doing quality work to deliver real carbon benefits and adhere to principles of additionality, verifiability, and community empowerment.

The Pachama platform makes it easy for organizations to find and purchase quality carbon credits. Visit Pachama today to learn more about the forest projects on our platform or reach out to us at [email protected]

The creation of a thousand forests is in one acorn Ralph Waldo Emerson