New discoveries led by researchers from the University of Cambridge, the University of Exeter, and the London School of Economics and Political Science reveal a new approach to price carbon credits and advance towards reaching “net zero”. This study may help to achieve a balance between greenhouse gases produced and received by the atmosphere.
Carbon credits are a way of measuring the removal of one tonne of carbon dioxide, or equivalent in other greenhouse gases, from the atmosphere. They are usually assigned to conservation projects or methods of reducing carbon emissions, and then sold to buyers (such as companies, governments, or individuals) who are seeking to contribute to reducing greenhouse gas emissions and/or compensate for their own carbon footprints.
The conservation of tropical forests is a nature-based solution, as the plants found in these ecosystems are important for mitigating the carbon dioxide levels in the atmosphere. However, this approach, which relies on the health of the tropical forests, may be less economically sound for stakeholders to offset their carbon emissions, as deforestation and natural phenomena, such as fires, floods, winds, and pests, can have detrimental effects on the forests. This makes this protection method somewhat impermanent, which may make buyers want to invest in technology-based, more permanent solutions instead.
REDD+, which stands for Reducing Emission from Deforestation and Forest Degradation, is a program designed to assign a financial value to carbon stored in forests. Recent discoveries revealed that only 6% of carbon credits from REDD+ schemes lead to preserved forests: this has led to a crisis of trust in carbon markets.
Co-author Professor Srinivasan Keshav from the University of Cambridge, said: “Our new approach has the potential to address market concerns around nature-based solutions to carbon offsetting, and lead to desperately needed investment.”
Our new approach has the potential to address market concerns around nature-based solutions to carbon offsetting, and lead to desperately needed investmentProfessor Srinivasan Keshav
The new scheme, Permanent Additional Carbon Tonne accounting (PACT), published in the Nature Climate Change journal, can be used to assess the value of various nature-based solutions.
Carbon credits are assigned to preservation projects that sequester carbon, weighting the value of the credits more heavily at the beginning of the expected time frame to highlight the importance of early and effective carbon reduction efforts. The technique takes a conservative approach, issuing a lower-bound estimate of when the stored carbon will be released, and rewards projects that exceed these intentionally low expectations by awarding them more credits. The new approach aids the comparison of several types of conservation projects, accounting for differences between them to crease a fair evaluation of their effectiveness and impact.
Professor Ben Groom, Dragon Capital Chair in Biodiversity Economics at the University of Exeter Business School, commented on the positive externalities of the novel approach: “Well-designed nature-based solutions projects present singular opportunities for benefitting biodiversity and rural livelihoods […] they mitigate the social costs of climate change considerably”, “Our new approach suggests how this contribution can be valued, enabling the direct comparison of nature-based and technological offset options for progressing towards net zero.”
This method is predicted to incentivize locals to protect forests, as the received carbon finance supports the development of alternative livelihoods that don’t involve deforestation. It also incentivizes long-term forest preservation by allowing for future carbon “payments”. This differs from the current approach, which burdens future generations with the responsibility for conservation without compensating for lost livelihoods.
This method is predicted to incentivize locals to protect forests, as the received carbon finance supports the development of alternative livelihoods that don’t involve deforestation
Dr Tom Swinfield, from the University of Cambridge’s Department of Zoology, stated: “Tropical forests are being cleared so quickly that if we don’t protect them now, we’re not going to make the vital progress we need towards net-zero. Buying carbon credits linked to their protection is one of the best ways to do this.”