Article
The Hunt for the Perfect Carbon Credit
The cost vs. quality tradeoff is severe, but we are still relatively early in the development of the carbon market, and opportunities for affordable, high-quality credits are there to be had.
Not everyone likes carbon credits. And, at first glance, the critics seem to have a point: buying up “emissions permissions” will never get us to net zero.
On the other hand, we must decarbonize the global economy as quickly as possible. Progress is being made on many fronts, but solutions are simply not coming fast enough in many sectors. And, for some carbon-intensive services that people rely on, there may never be a way to eliminate emissions completely.
Carbon credits can help solve this dilemma. Because the atmosphere doesn’t care whether emissions come from a cement kiln in China or a traffic jam in Los Angeles, funding quality carbon-cutting activities elsewhere is just as effective as a company decarbonizing its own processes in terms of net global emissions. In many cases, such arrangements are a far more efficient means of cutting carbon, providing a faster and more economical path toward net zero.
But what does it mean for carbon credits to be high quality, and how does that affect their price?
High-tech carbon removal services like direct air carbon capture and storage (DACCS) provide total certainty about the effectiveness and permanence of their credits, but they are expensive and short on co-benefits. Nature based carbon credits, like forest preservation, are cheaper and offer social and ecological advantages, but their climate impact is questionable.
Our partners, TBN Atlantic Rainforest, have a solution that addresses all these concerns: ecosystem restoration in an international biodiversity hotspot on land that is legally protected into perpetuity. To understand what sets them apart, let’s consider what the rest of the carbon market looks like.
Compliance Markets and the Voluntary Carbon Market
Photo credit: https://thefirstclasstravelguide.com
There are two main categories of carbon markets.
Compliance markets are government-regulated systems where companies must buy or trade carbon credits to meet legally mandated emission reduction targets, such as those in the EU Emissions Trading System.
In contrast, the voluntary carbon market (VCM) operates outside regulatory frameworks, allowing businesses and individuals to purchase credits voluntarily to compensate for their emissions, demonstrate environmental responsibility, and make progress toward their net zero commitment.
Generally speaking, carbon credits in compliance markets can be thought of as allowances. In such markets, total carbon emissions are capped by law and each company may emit a portion of the total. A company that fails to limit its emissions sufficiently must purchase credits from other companies that managed to stay under their carbon allowance for the period. On the other hand, carbon credits on the VCM are purchased to finance organizations that remove CO2 from the atmosphere or prevent new emissions.
The Trouble with Carbon Credits
Photo credit: ChristofferRiemer
The VCM would seem to provide an amazing opportunity for climate change mitigation. In theory, it offers a system for financing the low-hanging fruit, allowing us to cut the most emissions for the lowest cost now. Unfortunately, it is not so simple. There have been a number of legitimate criticisms and even outright scandals associated with the VCM.
To start with, it isn’t always clear that what has been sold as a credit actually reduces emissions. Credits funding wind and solar projects have traditionally made up a large part of the VCM, but the Integrity Council for the Voluntary Carbon Market (ICVCM) announced in 2024 that they would not approve any renewable projects to receive its high-integrity Carbon Credit Principles (CCP) label.
This seems somewhat counterintuitive. Isn’t renewable energy good for the climate? Keep in mind that carbon credits are meant to compensate for other emissions. In order to do so, the projects they fund must remove or avoid emissions that otherwise would still be in the atmosphere.
Ash Farber, Sourcing Manager at Zero Mission, a carbon credit provider based in Stockholm, says that clean energy credits made sense historically but no longer. “Back during the Kyoto Protocol, around the time when this type of credits were first made, renewable energy was expensive to produce, and carbon credits did a good job of helping with that. Now renewable energy is cheaper than fossil energy, so those energy credits aren't really helping.” Since renewable technologies are the likely choice for new generation projects, it’s likely that they don’t need funding help from carbon credits.
Similarly, “avoided deforestation” projects are commonly marketed as low-cost opportunities for carbon credits. Land use change, such as when forested areas are cleared to make way for agriculture, is a major contributor to climate change. However, for forest preservation to constitute an avoidance of emissions, there needs to be total certainty that the preserved area would otherwise have been deforested, which can be difficult.
Moreover, if preserving one area simply displaces the deforestation to another area, no emissions have really been avoided, and it is extremely tricky to ensure that no displacement occurs. If preserving forest in the Global North rather than clearing it for cattle means that more beef is exported from Brazil to meet demand, it is likely that total emissions have actually increased.
Another issue is verification. When you’re depending on someone else to cut emissions, it is important that they ensure that the agreed upon actions are taken. This can be challenging, especially when the intervention is in a remote location or involves uncertain methods. For example, mass tree planting is a popular solution with offsetting potential, but followups on major projects often find that most saplings die within a few years of planting. For such projects to work as climate action, they would need to be monitored indefinitely, and only surviving trees could be counted toward credits.
A related complication is the question of permanence. Captured CO2 is used in many products, like carbonated drinks and fertilizer, but such uses do not work as carbon offsets because the captured carbon is quickly released back into the atmosphere. Since CO2 lasts for centuries as a greenhouse gas, only solutions with a comparable lifespan can legitimately be said to work as credits.
Wildfires pose a particularly difficult challenge in this respect. Forests in some ecosystems, such as many in the western United States, naturally experience wildfires every 5 to 25 years. An area preserved from logging that burns down, even many decades later, hasn’t really done anything to mitigate climate change. The emerging carbon credit insurance market may provide a solution to this issue, but if such a project can’t be insured, it’s probably not a good choice.
Money Matters
Deforestation in Bolivia as seen from space. Photo by NASA.
As might be expected, there is tension between the quality of carbon credits and their price. Understandably, anyone willing to spend money for climate change mitigation would like to make as big of an impact as possible with their contribution. However, according to Farber, “As with anything, you get what you pay for. If you're paying less than $15, $20 a ton, you should be asking questions.”
Some of the methods for carbon offsetting that address all the issues mentioned above are, at the moment, prohibitively expensive for most buyers. DACCS is the quintessential example.
DACCS technologies have much to admire. By literally sucking carbon out of the air, their results are clearly additive and easily verified, and captured carbon can be mineralized or stored underground where it will remain for thousands of years. However, the current price of a DACCS credit averages about $530 USD, with some well-known providers charging up to $800 USD.
At the other end of the spectrum, there is a whole world of dubious credits being hawked by organizations that may or may not themselves believe that their products perform as advertised. Such credits often take the form of funding for renewable energy projects and avoided deforestation. And they are by far the most popular kind (no great surprise given that they generally cost less than $4 USD).
But buyers with a genuine interest in making a positive impact must ensure that their purchases go toward high-quality projects. A few dollars per credit is no bargain if it does not in fact keep a metric ton of CO2 out of the atmosphere. Ash Farber’s advice: “If the credits are too expensive, just buy less and make sure you get something good.”
Benefits Beyond Climate
A final issue to consider is what else offsetting projects offer besides their impact on emissions. Given the wide range of alternatives, social and ecological co-benefits should play an important role in decisions about which projects merit funding. While the carbon they pull out of the air is unquestionably positive for the climate, DACCS operations don’t do much else for people or the planet (few new jobs, no energy generation, no boost for biodiversity).
Nature-based solutions can excel in this respect, potentially preserving or restoring ecosystems, enhancing biodiversity, and creating jobs in conservation and recreation. Of course, these contributions must be carefully evaluated. Planting monocultures of fast-growing trees accomplishes few, if any, of these goals. And “avoided deforestation” may check these boxes, but addressing the questions of additionality, verification, and durability discussed above remains critical.
The Goldilocks Zone
Ecosystem restoration in progress in the Atlantic Forest region.
For many companies and investors, the search is on for carbon credits that fill a mostly empty “just right” space in the market: high quality (additional, verifiable, durable), not too expensive, and offering social and environmental co-benefits. The number of projects that meet all those criteria is limited, but not zero. Which brings us back to TBN Atlantic Rainforest.
Once stretching along the east coast of Brazil with lush vegetation and rich wildlife, less than 10% of the Atlantic Forest remains of the over one million square kilometers it covered historically. While smaller than the more famous Amazon, the Atlantic Forest hosts a similarly dazzling array of biodiversity, including thousands of species of plants, animals, and insects found nowhere else in the world, many of which are endangered.
Millions of people now live in the area that the Atlantic Forest used to occupy, including in the mega cities of Rio de Janeiro and São Paulo, but the vast majority of the forest was cleared for agriculture. As is common in the tropics, the forest ecosystem is necessary to sustain soil fertility. Without it, the soil degrades after just a few years and is no longer well suited for growing crops. As such, there are millions of hectares of agriculturally degraded and economically devalued land in the region.
A common problem with nature-based carbon credits is that carbon sequestration is slow moving and vulnerable to reversals (think tree planting and forest fires). Here again, the Atlantic Forest is an especially promising candidate. Unlike some ecosystems where tree growth is slow, the Atlantic Forest’s tropical climate allows for relatively fast regeneration, making it an efficient option for capturing carbon. And as the moist tropical climate of coastal Brazil means that major wildfires are not a concern, the only threats to a forest there are human driven.
There are means of ensuring that restored areas are protected from manmade deforestation. TBN Atlantic Rainforest takes advantage of a Brazilian legal designation known as Private Natural Heritage Reserves (RPPN for its Portuguese acronym). RPPNs allow landowners to permanently protect natural areas while maintaining private ownership and creating opportunities for ecotourism, research, and sustainable income streams for local communities. Adding to the legal protection of RPPN status, this engagement with local stakeholders serves to bolster the long-term security of rejuvenated land.
As for scale, the carbon benefits of a project like restoring the Atlantic Forest are more than significant. TBN Atlantic Rainforest calculates that each hectare of restored land can capture 12 to 25 metric tons of carbon per year and will continue to do so for about 100 years, at which point the forest reaches maturity and its annual sequestration declines. The World Resources Institute estimates that there are 40 million hectares of land suitable for Atlantic Forest restoration, making the biome a whale of a potential carbon sink.
The Low-Hanging Fruit of Carbon Credits
While carbon credits are no silver bullet, they offer a powerful tool in the fight against climate change—if used wisely. The VCM has been plagued on one end by issues of additionality, verification, and permanence, and by high costs and limited scalability on the other. But high-quality projects do exist at reasonable prices. Without compromising standards of verification and monitoring, organizations can maximize the impact of their contributions by seeking out this low-hanging fruit.
Ecosystem restoration, particularly in regions like the Atlantic Forest, may present the most compelling methodology currently available. By combining effective carbon sequestration with biodiversity and community benefits, these projects may offer the greatest impact for the climate, biodiversity, and people that are available right now. As the global economy works toward decarbonization, investing in well-designed offset projects can help bridge the gap—making crucial progress as we wait for more solutions to emerge and scale.
To learn more about TBN Atlantic Rainforest and how you can help restore one of the jewels of global biodiversity, click here or watch We Don't Have Time's interview with CEO and founder Peter Harris below.
https://youtu.be/_Qj3-K_w8Hc?si=L08WCOjpB7sC6r-f
Paid partnership with TBN Atlantic Rainforest. We encourage you to leave a comment or write a climate review.
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2 w
Important read! Too many carbon credits lack real impact verification, permanence, and additionality matter. TBN Atlantic Rainforest’s approach is a step in the right direction, and more so it will help community, but the market still needs higher standards.
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2 w
Carbon capture in trees is never permanent and cannot be paid for by selling carbon credits which are used to compensate for new fossil emissions. The more fossil carbon we emit, the greater chance the trees die from climate extremes. The carbon credit fire budget in the Californian market which was supposed to last for 100 years burnt up in a few fire seasons. Here 29 researchers explain all arguments for why carbon offsetting does not reduce emissions and should not be allowed by the SBTi: 29 scientists urge the SBTi to remain science-based and not allow carbon offsetting for Scope 3 emissions: "As decades of research has demonstrated the flaws of carbon offsets, embracing them would be a clear departure from the commitment to science-based approaches by the SBTi." https://www.edie.net/scientists-on-why-the-sbti-should-not-allow-more-carbon-offsetting-to-address-scope-3-emissions/
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2 w
@maria_johansson_064 Thank you for this thoughtful response! I agree with you that NBS carbon credits have to be viewed critically, but in cases where the conditions are right, they seem like a valid solution. As it says in the article, western North America is a fire-prone region, so planting forests there to offset emissions makes no sense. However, would you agree that focusing restoration on areas where wildfires are rare should address this concern?
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3 w
Adding to the legal protection of RPPN status, this engagement with local stakeholders serves to bolster the long-term security of rejuvenated land. 🇧🇷
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3 w
We just need to note climate change is urgent matter and where the solution fit should work there if there is a lot of wind and sun work with renewable energy, if it water work with hydrothermal, fertile or waste lands do reforestation. Responsibility, commitment, trust, assurance.
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3 w
The evolution of carbon credits is interesting, but I think most people are not aware of what carbon credits look like today. Thank you for the insightful review of the situation!
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@Adam_Wallin yeah it's knowledgeable.
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3 w
What is considered a "reasonable price"?
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3 w
@ann_nyambura_542 A price that covers the cost to do it, plus a profit normal for the market, for all companies involved.
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3 w
Certainly! Carbon credits are a vital tool in the fight against climate change. However, their success relies on transparent processes and credible projects that deliver measurable benefits. By focusing on integrity and accountability, we can enhance their role in sustainable development.
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3 w
@walter_lungayi True but seems transparency, responsibility commitment accountability is turning to be rare.
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3 w
I think carbon credits are a great motivation for companies to offset their emissions. It also plays a great role in innovation.
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3 w
The carbon offset projects should be analysed and be found to be impactful.
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@tabitha_kimani true analysed, how credible it can solve or achieve us time measures to.