Natural Climate Solutions and Carbon Markets Grow Hand-in-Hand
by Amie Fleming, Associate Director
Natural climate solutions have emerged as a key element in our global fight to combat climate change, achieve Net Zero, and slow or stop the rise in global temperatures. As the weeks and months pass, it is not a question of which solution is necessary – technology, nature-based solutions, energy transition – but how quickly we can move all solutions forward.
Forests represent a huge opportunity to capture and store carbon, sustain ecosystems, and support biodiversity. The astronomic growth of carbon markets begs the question – at some point in the future could trees be worth more standing (and capturing emissions) than cut down?
Emissions and Net Zero commitments are top-of-mind for many companies and shareholders, which is driving increased demand for high-quality additional forest carbon projects through voluntary U.S. carbon markets. The voluntary market is growing rapidly, and along with that comes growing pains: new protocols and verifications standards continue to be introduced. And despite new initiatives such as the Voluntary Carbon Markets Integrity Initiative and the Integrity Council for the Voluntary Carbon Market, the market remains opaque and variable for many key actors.
Experts predict global demand for voluntary carbon credits could increase by a factor of 100 by 2050, which at current price levels could produce a nearly $200 billion global market. In short, the demand for carbon projects is incredibly high and steadily climbing. But supply (and high-quality supply in particular) has not been able to keep up with the growing demand, which has allowed less scrupulous actors to enter the markets, bringing with them carbon credits of questionable quality.
Natural Climate Solutions account for 65-85% of the practical potential of carbon credits in 2030.
Source: Taskforce on Scaling Voluntary Carbon Markets / McKinsey, January 2021
Means to an End
At Quantified Ventures, our focus is on nature-based solutions to climate, environmental, and resilience issues. We design, capitalize, and scale solutions in frameworks that often crowd in public and private partners, various capital sources, and monetize several project outcomes to reduce risk carried by any one party and enable greater scale.
The end goal of many of our projects is not solely carbon sequestration. For example, our Appalachian reforestation project’s main goal is to address forest degradation post-mining, building a forest that sequesters carbon and enhances biodiversity. In Maine, our goal is to bolster forest stewardship and secure the future of the forest for both the climate and community. The Soil and Water Outcomes Fund pairs water quality improvement with carbon outcomes in a model that provides economic and soil health benefits to farmers.
In these cases, carbon is just one piece of the puzzle. A forest has ecological value for communities and ecosystems beyond carbon sequestration, but carbon can be a powerful tool to ensure the forest and the multiple benefits it provides are protected long term.
Carbon markets, offsets, and insets help facilitate our nature-based solutions and can serve as a bridge to making bigger things happen.
Why Quality Matters
When it comes to carbon, Europe doesn't distinguish between voluntary and compliance markets, as the full European Union operates under a legislatively created emissions trading system—or a fully compliance-based market. The United States, without similar regulatory oversight, has a large voluntary market that it has resulted in varying degrees of quality and constantly evolving standards.
It can be an attractive shortcut for companies to buy credits to offset the pollution they create, as well as take efforts to reduce their scope 1, 2, and 3 emissions. Sometimes offsets are an important stop gap, offsetting emissions where it is not possible to eliminate them. But offsets can also in cases permit pollution that could be all together avoided. Some carbon credits have come under scrutiny about the level of additional carbon sequestration they actually produce.
When companies do need carbon credits, they are faced with a choice: credits that come more cheaply are often less transparent and are not run through legitimate registries (such as Verra, CAR, ACR, and Gold Standard). There are steps you can take to ensure that you avoid purchasing low quality credits.
Higher quality credits, on the other hand, are rigorously transparent and require concrete proof that the project is clearly removing carbon from the atmosphere at a rate beyond what would happen normally. For Quantified Ventures, our project partners, and the buyers we work with, high quality credits are a requirement. They are more highly valued and align with our focus on predicting, measuring, and reporting the verified outcomes of a project to transparently demonstrate value.
David and Goliath
For many agriculture and forest carbon projects, small parcel sizes make it very hard to break into the carbon market. Sixty acres is the average size for most small projects, and groups working with this size plot traditionally have a harder time entering the markets since larger entities can enroll 5-10k acres at a time.
Reforestation projects also present a timing challenge as we must wait for the trees to mature to achieve the desired outcomes. At Quantified Ventures, we work with many smaller private landowners, so we’ve had to figure out how to make carbon a part (but not the entirety) of our project capital structure, enabling the work to happen now, while guaranteeing community and climate benefit for the long term.
Ultimately, helping these partners access the carbon market is a key component of helping solve for the financing disconnect.
The vast majority of our projects are about solving multiple overlapping challenges and producing win-win-win solutions for communities, organizations, and our planet. The more our work progresses, the more we find ourselves working at the intersections of climate, health, environmental justice, recreation, water, agriculture, and more.
Carbon is, for many of these projects, a wonderful and important means to a more dynamic end. And while they receive less attention or are more nascent, so too are water quality / quantity, biodiversity, resilience, and health outcomes markets. We are not myopically focused on carbon sequestration, but with the markets being as lucrative as they are, everyone benefits when we leverage carbon outcomes wherever and whenever we can to move nature-based solutions forward.
If your work involves natural climate solutions and carbon markets please connect with me at fleming@quantifiedventures.com so we can share ideas and opportunities!
Natural climate solutions can provide “~30% of near-term climate mitigation needs through protection, improved management, and restoration of ecosystems.”