Carbon Credits and Credibility: A Collaborative Endeavor

Abstract

Voluntary carbon markets (VCM) hold the promise of offsetting hard-to-decarbonize emissions for corporate climate and net zero strategies (Gentile 2022). However, concerns about greenwashing and the quality of voluntary carbon credits (VCC) have increased as these markets have grown (Holger 2023). This increased scrutiny of credit-stated impacts has generated both interest and work on identifying scalable validation solutions to get VCM on a legitimate path towards supporting net zero strategies (Coffield et al. 2022; Loftus et al. 2015). At this moment in VCM, there are significant technological and financial barriers inhibiting precise estimates for a carbon sequestration project’s impact (Gawel et al. 2023). This is particularly true for nature-based climate solutions (NBS), which achieve carbon sequestration through biological means, such as reforestation. Uncertainty related to measurements and assessment is a significant challenge, and this must be addressed with new rigorous scientific and economic approaches. This is an urgent task given the speed at which corporations must decarbonize to mitigate the worst impacts of climate change. VCC can play an important role in these efforts through offsetting hard-to-decarbonize-emissions. This white paper is the result of a collaborative effort at the MIT Climate and Sustainability Consortium (MCSC) with BBVA and IBM Research focused on the challenges for robust and scalable measurement for VCM and for NBS in particular. From project inception to project retirement, robust systems for evaluating credits must incentivize developers towards activities that are most effectively and reliably sequestering carbon. The goal of this paper is to move beyond often discussed challenges in voluntary carbon markets, and show a potential pathway towards scientifically robust and scalable carbon sequestration assessments that could provide trustworthy market legitimacy. To do this, we constructed a case study using satellite data and AI to estimate the sequestered carbon of two carbon offset projects bought in 2023. This collaboration highlights the value of working across different market actors: technology providers (IBM), market participants (BBVA) and academics (MIT) to tackle climate change action bottlenecks.