Month: January 2024

Considerations and strategies for FLAG SBT readiness

, January 31, 2024

The land sector could contribute up to 37% of all emissions reductions and removals needed through 2030. To accelerate that mitigation and stimulate climate action in the private sector, the Science Based Target initiative (SBTi) released guidance for how corporations that have Forest Land and Agriculture (FLAG) designated sectors in their value chain can reduce associated emissions. Published in late 2022 and updated in December 2023, SBTi’s FLAG requirements stipulate a reduction of emissions associated with the land sector (also referred to as agriculture, forestry and other land use (AFOLU) sectors). 

Historically, it has been difficult to evaluate the source of emissions with greenhouse gas (GHG) accounting and other standard target setting approaches. And prior to releasing its recent FLAG guidance, SBTi did not require FLAG emissions be included in target setting. This rule aims to close that gap in land-based emissions, ensuring these emissions sources are included in science-based target (SBT) setting. 

There are many pieces of criteria necessary for a FLAG target to get validated, and it can be challenging to make sure each step is completed correctly. To help you prepare successful FLAG targets, we will look at key criteria of FLAG SBTs and how they are different from other targets, as well as the common challenges and solutions that compliance companies may face in addressing their FLAG emissions.

Who is impacted?

Graphic detailing who is impacted by FLAG SBTi targets: Companies with land-intensive activities and companies with srcset=20% FLAG emissions.” width=”860″ height=”572″>

Before getting underway, it is prudent to step through the FLAG requirements to determine if your organisation stands to be affected and if a FLAG target is relevant to your company. All organisations that are involved in SBTi will have to quantify their FLAG emissions, but it also boils down to the sectors your operational activities are related to and what percentage of your emissions fall under the FLAG sector umbrella.

SBTi stipulates that companies with FLAG-designated sectors (i.e., forest and paper products (forestry, timber, pulp and paper, rubber), food / agricultural production, animal source, food and beverage processing, food and staples retailing, and tobacco) in their value chain must set a FLAG target (unless FLAG emissions represent less than 5%).  A company with an approved SBTi target or a company setting its first SBTi target must set a FLAG target if their land-related emissions account for more than 20% of their total emissions across scopes 1, 2, and 3. Industries that could potentially be affected include retail, packaging, tourism and hotels, textiles / fashion, and building products. 

Companies that are part of FLAG designated sectors and fall below SBTi’s 5% threshold and companies that are not part of FLAG-designated sectors and fall below SBTi’s 20% threshold can choose whether to set a FLAG target (which is recommended), but they must quantify their FLAG emissions and, if not setting a separate FLAG target, then include them in their non-FLAG target, also called energy and industry targets. 

What is the flag target?

Before we get into the common challenges and solutions of FLAG SBT setting, let’s first define the key criteria of FLAG targets and outline how these targets differ from non-FLAG targets. A FLAG target is a SBT that applies to a company’s GHG emissions from AFOLU practices and consists of four key focus areas – land use change, land management, carbon removals and storage, and zero deforestation. FLAG SBTs are in addition to and separate from energy and industry SBTs, or non-FLAG targets, due to their specific coverage of land sector related emissions, but also due to very different decarbonisation potential. Graphic indicating that FLAG SBTi targets are separate from industry SBTs.Since FLAG SBTs are separate from non-FLAG SBTs, FLAG abatement cannot be used to meet energy and industry targets (e.g., improved forest management removals cannot be used to meet targets on fossil fuel emissions reductions), and biogenic removals must be accounted for only to meet FLAG targets.SBTi provides guidance for both near- and long-term FLAG targets, and provides two approaches to target setting – the FLAG sector pathway or FLAG commodity pathways for 11 key FLAG commodities (i.e., beef, dairy, leather, rice, timber, etc.). For near-term targets, SBTi states that target dates should be set for 5 to 10 years after the submission date, and for long-term targets, the date should be set for 2050 or earlier. Aligned to the 1.5 degree scenario, companies should strive towards meeting near-term goals with the ambition of reducing about 2.5%-4% of their FLAG emissions each year depending on the FLAG target pathway relevant to the target setter.

The FLAG target setting process is challenging and there are many nuances. SBTi excludes carbon credits, avoided emissions, product carbon storage, technological removals, and bioenergy as methods to account for FLAG emissions. 

SBTi sees the potential for increased carbon removals, and expects that committed companies deliver both emissions reductions and land-based removals. Companies can engage with biogenic carbon removals by employing agroforestry, restoring natural ecosystems, deploying silvopasture, improving forest management practices, and enhancing soil carbon sequestration. Carbon removals included in FLAG targets must be traceable, include primary data, lead to an increase in net land carbon stock, show long term storage of carbon, and take place on land owned or operated by the company (or, within their value chain). 

Removals are reported separately from emissions in your inventory and are counted against your FLAG emissions. Companies are encouraged to follow specific GHG Protocol (GHGP) Land Sector and Removals guidance, which requires similar methodology to what is found in offsetting projects (in this case, it would be insetting), and the percentage of carbon reduction over time is crucial. The final FLAG SBT criteria is to have a public, net zero deforestation commitment. Depiction of the elements included in an SBTi FLAG target.

How should I prepare?

For FLAG targets, companies should first identify and include all land-related emissions in their GHG inventory, following GHGP Guidance. If your organisation stands to be impacted by the FLAG rule, there are many ways to get ready and ensure that your target becomes validated. First, companies can begin learning about no deforestation commitments and taking prescribed steps that allow for an end to deforestation by 2030. Companies may also start understanding their supply chain and its connection to deforestation. A key strategy is data collection on biogenic commodities in the supply chain (or, data on any environmental attributes these commodities might have). Another important component to FLAG preparation is engagement with suppliers and understanding key FLAG-related suppliers. Lastly, companies should explore the eligible FLAG sector removal projects that exist within their value chain.

What are the expected challenges? 

SBTi’s FLAG guidance has been active for about a year now, and as of January 2024,  just over 20 companies have received validation for their FLAG targets. FLAG emissions reporting and reduction is still a new space, and there are factors that are important to consider before getting started. From our experience, a common barrier to FLAG target setting is that most FLAG emissions are in scope 3, thus meaning limited available data and influence. Another challenge is that many companies still use spend data for part of their scope 3 emissions, while more granularity is required in order to quantify FLAG emissions. 

There also isn’t clarity around how to set boundaries and what emission sources are covered, as the GHGP for Land Sector and Removals Guidance is still in draft format. There are no databases available that directly address FLAG emissions. Much of the FLAG-related data was not historically collected and thus needs to be integrated into the data collection process and supplier communication (i.e., data on no deforestation and land use practices).

Next steps

Companies with operations and activities that touch AFOLU sectors are in a unique position to reduce a major source of emissions and advance collective movement towards a net zero economy. We are encouraging our clients to begin the process of FLAG emissions accounting and prepare for target setting now, with a focus on accurate data and value chain engagement. It is important to remember to establish the right boundaries (what are FLAG emissions and non-FLAG emissions?), and focus on hotspots and commodities with higher FLAG emissions. A final tip is that your company can use life cycle analysis (LCA) data to quantify what proportion of FLAG emissions are in your inventory. 

3Degrees closely follows the evolution and changes to both GHGP and SBTi guidance, and posts regular updates on the latest FLAG-related requirements. Check back with us to stay up-to-date, or get in touch today for additional target-setting expertise. 

Clean Hydrogen Production Tax Credit (45V): What the guidance means for the REC market

, January 23, 2024

In an effort to increase the quantity of clean hydrogen (H2) in the U.S., the Inflation Reduction Act (IRA) incorporated a 10-year production tax credit based on the carbon intensity (CI) of the H2 produced, often referred to as the 45V tax credit. The Treasury Department recently released additional guidance on CI accounting, including through the use of book-and-claim accounting of renewable energy certificates (RECs). 

This guidance enables organizations to match energy used in the production of hydrogen via electrolysis with qualifying unbundled RECs, effectively lowering the CI score of the hydrogen product. The guidance applies the widely accepted three-pillar approach to emissions reductions of hourly matching, deliverability, and additionality requirements by specifying that RECs meet certain geographic and temporal criteria. While the final 45V guidance will likely put upward pressure on several regional REC markets in the medium- to long-term, the extent of the impact on prices is uncertain.

Three pillar hydrogen policy for 45V tax credit.

However, we can discern 45V’s current market impacts, along with what impact it may have on corporate buyers. Read on for our overview of the 45V guidance. 

REC qualification requirements

Under the proposed rule, RECs that meet the following criteria can be matched to qualifying electrolytic H2 production to substantiate a lower CI: 

Additionality: Generation must come from renewable energy facilities with a commercial operations date (COD) within three years of the hydrogen facility’s placed in service (PIS) date. Incremental generation from capacity upgrades (uprate) also qualifies. For example, if the hydrogen facility is placed into service in October 2025, the renewable energy facility must have a COD of November 2022 or later.

Deliverability: Power must be sourced from the same region as the hydrogen producer, as identified in the map on page 3 of the DOE’s 2023 National Transmission Needs Study.

Hourly Matching: Annual matching is allowed until 2028. Hourly matching will be required thereafter. This means that RECs generated in 2026 can be matched with electricity used in hydrogen production in 2026.

Green-e® or other certification of RECs is not required, however, Center for Resource Solutions (CRS) is in the process of developing a clean hydrogen standard aligned with 45V tax credit criteria. RECs must be verified by a third-party auditor to ensure criteria are met, and are properly registered and retired in a qualified tracking system1.

Clean hydrogen project eligibility

Specific requirements apply to both the facility and the taxpayer to qualify for the investment tax credit (ITC).

Qualified Hydrogen Facility

To receive the 45V credit, the hydrogen facility must begin construction before 2033. The facility cannot also claim the 45Q carbon capture and sequestration credit provided under the IRA.

The H2 produced must be primarily for sale or use; that is, if the hydrogen is flared, vented, or used to produce more H2, or if the cost to produce the H2 is less than the credit, the credit will be reduced or not awarded. Hydrogen may be stored before its sale or use without changing its eligibility for 45V.

Taxpayer

The taxpayer eligible for the credit is the owner of the qualified H2 production facility at the time of the qualifying hydrogen’s production.

ITC Conversion 

The default structure of the 45V tax credit is as a production tax credit (PTC). However, H2 producers may elect to claim an investment tax credit (ITC) in the PIS year for the facility. The amount of the ITC would be based on the facility’s expected CI score. If the facility has been designed to minimize the hydrogen’s CI score, the entity can claim the maximum credit. However, the ITC is subject to recapture, so the entity must file an annual report verifying the average CI score of hydrogen produced for each five years after PIS. 

REC market impacts

The 45V guidance is likely to increase the demand for RECs across the U.S., especially in regions with existing or emerging H2 production facilities, such as Texas and the Midwest.2 It’s not yet clear how this new demand will interact with Green-e® supply, however, there are some mitigating factors on this market’s development:

  • Demand for green hydrogen in the U.S. is driven primarily by consumer choice, unlike in Europe where there are mandates and production targets. This means that unless and until green hydrogen is truly cost competitive (at this point would essentially require maxing out the 45V credit, which ranges from $0.60-$3.00 per kilogram of H2), there is somewhat of an economic barrier to the development of new electrolytic facilities.
  • The Treasury’s approach to the three-pillars—hourly matching, deliverability, and additionality— is more restrictive than some of its European regulatory counterparts. The hydrogen industry has concerns about the ability to procure compliant RECs at a reasonable price, especially for smaller producers with less overall funding that are often unable to to afford to co-locate electricity production and will need to rely on grid energy for operations.
  • Many investors are waiting for the rules to be finalized before making long-term investments. Similarly, hydrogen consumers are awaiting certainty before agreeing to long-term contracts.

45V tax credit guidance status and timeline

Timeline for 45V tax credit guidance.

The draft regulation was released by the Treasury Department in December 2023 and the public comment period for the proposed regulation runs through February 26, 2024, which will be followed by a public hearing in March. The relevant federal agencies will then work to review the feedback received and make changes to the draft regulation. 

The final regulation is expected in June or July—any later and it will become subject to review by the new administration post-election. 

While there is still a lot to be determined prior to the final regulation being announced, we’ll be keeping a close eye on the 45V guidance’s impact on the market. If you’d like to discuss what this means for your organization in more detail, please reach out.

  1. Qualified EAC registries currently include, but are not limited to, the following: Electric Reliability Council of Texas (ERCOT); Michigan Renewable Energy Certification System (MIRECS); Midwest Renewable Energy Tracking System, Inc. (M-RETS); North American Registry (NAR); New England Power Pool Generation Information System (NEPOOL-GIS); New York Generation Attribute Tracking System (NYGATS); North Carolina Renewable Energy Tracking System (NC-RETS); PJM Generation Attribute Tracking System (PJM-GATS); and Western Electric Coordinating Council (WREGIS).
  2. https://www.canarymedia.com/articles/hydrogen/new-clean-hydrogen-rules-will-favor-some-regions-more-than-others

Guarantees of origin (GOs): What are they and how do they fit into your climate plans?

, January 31, 2024

A wind renewable energy project in the Netherlands that produces Guarantees of Origin (GOs).

Setting corporate climate goals and supporting the transition to renewable energy is commendable, but how can organisations move from plan to action? One way many companies in Europe are meeting sustainability goals, namely scope 2 targets, is by purchasing guarantees of origin (GOs).

GOs help bring clarity to what can otherwise be an opaque market, as without GOs, it can be difficult to know the source of energy purchases. However, these market-based instruments add transparency to energy generation and usage, particularly for the renewable energy market.

In this guide to GOs, we’ll take a closer look at key information such as:

  • What GOs are
  • Why organisations use GOs
  • Types of GOs
  • The Association of Issuing Bodies (AIB)

What are guarantees of origin (GOs)?

A guarantee of origin (GO, also abbreviated as GoO) is a market-based instrument typically used to represent the environmental benefits of renewable energy. GOs are often used in connection to one MWh of electricity, but they can also apply to all types of energy, like gas (including hydrogen), or heating and cooling. Organisations purchase GOs on a voluntary basis to meet scope 2 targets and other sustainability goals.

GOs generally certify electricity from renewable sources, such as solar, wind, hydro, or biomass. However, GOs can also be issued for electricity generated from non-renewable energy sources. This broader application allows for a comprehensive tracking of energy origins regardless of the source. Consequently, organisations should ensure any GO purchases align with their sustainability goals.

GOs vs. EACs

GOs are a type of energy attribute certificate (EAC) used across much of Europe. EACs generally represent the non-power benefits of renewable energy, with different countries and regions using different types of schemes that each have slightly different rules.

In the US, for example, renewable energy certificates (RECs) are typically the EAC of choice. Elsewhere, international renewable energy certificates (I-RECs) are another type of EAC used across over 50 countries.

While different types of EACs are often similar to one another, they can vary in areas like vintages and accepted energy sources.

Why are GOs important?

GOs that represent renewable energy are important because they help support renewable energy projects across Europe, and can also allow organisations to claim the environmental benefits of renewable energy generation, without always having to directly obtain power from a renewable energy producer. Depending on factors such as your location, you may not be able to install an on-site solar array or other clean energy source. You also might not be located in a market where you can directly purchase power from a renewable energy generator.

Whether GOs are sold as part of a power purchase agreement (PPA) or separately from their underlying energy sources, purchasing ones linked to green energy can help add value to renewable energy generation and provide incentives to generate renewable energy.

GOs can also potentially be used to lower an organisation’s scope 2 emissions, which include indirect energy purchases, depending on the accounting method used. Under the GHG Protocol’s Scope 2 Guidance, GOs can be used to reduce scope 2 emissions when using the GHG Protocol’s market-based accounting method. GOs can also be used to meet other corporate reporting standards and commitments, such as RE100 and CDP disclosures.

Project types for GOs

GOs can technically certify any energy source, but they predominantly certify renewable energy production, in line with the criteria set by a European Union (EU) directive. While GOs are predominantly used within EU member states, their application extends beyond the EU, including countries like  the UK. (However, the UK uses a distinct version of the GO system, as explained later in this article.)

These renewable energy sources include ones such as:

  • Wind
  • Solar
  • Geothermal
  • Tide/wave power
  • Hydropower
  • Biomass
  • Landfill gas
  • Biogas

What is the Association of Issuing Bodies?

The Association of Issuing Bodies (AIB) is an international association working across much of Europe to implement a system for issuing, trading, and cancelling GOs. The AIB does this through the European Energy Certificate System (EECS), which is meant to standardise and harmonise the use of GOs across Europe. AIB currently encompasses 36 issuing bodies across 28 countries.

Different issuing bodies maintain their own registries to track GOs. In this diverse landscape, the EECS system, administered by the AIB, serves a crucial role in preventing administrative issues like double counting renewable energy claims across Europe, which would otherwise inhibit climate progress. The AIB functions as a hub that acts as a “central point for transferring certificates between registries,” the organisation explains. This centralization by the AIB ensures a streamlined and consistent approach across different countries, enhancing the effectiveness and reliability of the GO system in Europe.

Types of GOs

GOs fall into two main categories:

1. AIB GOs

AIB GOs are ones that meet the AIB’s EECS requirements, such as specifying the source and production method of the underlying energy, and providing assurance that the rights to the benefits of a specific GO can only be claimed by the certificate holder.

AIB GOs are used across more than 25 member countries in Europe, such as France, Germany, and Spain.

2. Non-AIB GOs

Not all GOs fall under the eye of the AIB and follow EECS requirements. Some countries that are not members may have their own national systems. For example, the UK has a similar yet alternative type of EAC, known as renewable energy guarantees of origin (REGOs), that has slightly different EAC characteristics (e.g., vintage limitations). The REGO “scheme provides transparency to consumers about the proportion of electricity that suppliers source from renewable electricity,” notes the UK’s Office of Gas and Electricity Markets.

As such, careful consideration of the quality of the certificates is necessary before purchasing those that lack the backing of well-established systems like the EECS system or that come from established markets, like REGOs.

 

Beyond these categories, organisations can also purchase GOs and other EACs that have additional labels that signify enhanced sustainability criteria of the underlying energy sources.

For example, the EKOenergy label is applied to some GOs that meet this ecolabel’s additional sustainability requirements, like those certifying sustainably produced renewable energy.

Even though renewable energy suppliers generally release minimal operational greenhouse gas (GHG) emissions compared to fossil fuels, that does not mean that all renewable energy generation has the same environmental impact. EKOenergy criteria, for instance, require solar or wind installations to be “located outside protected nature areas and outside important bird areas. The same rules apply to energy from geothermal installations and from marine energy installations,” the organisation explains.

◉ AIB GO (AIB Guarantee of Origin)
◉ Non-AIB GO or REGO (Non-AIB Guarantee of Origin or Renewable Energy Guarantee of Origin)

Getting started with GOs

While GOs can provide important environmental advantages, and organisations like the AIB are trying to provide clarity and standardisation, it can be difficult to navigate the market on your own.

If you’d like more guidance on how GOs can support your sustainability goals and help you lower your scope 2 emissions footprint, please get in touch. 3Degrees, an award-winning seller of renewable energy, only offers GOs that represent renewable energy, and we can help you figure out how GOs fit into your energy and emissions strategies.

 

FAQs

Want some quick answers to frequently asked questions about GOs? Take a look at the following:

What is the price of a GO?

A GO does not have a fixed price. Instead, it is a market-based instrument with a fluctuating price based on supply and demand. GO pricing can be volatile, but has gone up significantly since 2022.

Who issues GOs?

GOs are authorised by different issuing bodies such as regulators throughout different countries in Europe, each operating under its country-specific regulatory framework. However, the AIB aims to harmonise the issuance, trading, and cancellation of GOs throughout much of Europe, though countries outside of this scheme, such as the UK, have their own schemes that adhere to distinct regulatory guidelines and objectives.

For more FAQs about EACs (GOs are one of several types of EACS), see our guide on global EACs here.

The Complete Guide to Carbon Credits

, January 22, 2024

How do carbon credits work and how can companies purchase carbon credits?

Setting and achieving corporate climate targets is a laudable yet challenging goal. As much as you may want to reduce greenhouse gas (GHG) emissions, transitioning to net zero can take decades. However, buying carbon credits can help you compensate for emissions that you can not yet eliminate or those that are nearly impossible to avoid.

For example, your company might be working on a plan to reduce supply chain emissions by changing suppliers. Since reorienting your supply chain can take time, you might purchase carbon credits in the short-term to help reduce your climate impact. Or, you might be working toward reaching Science Based Targets initiative (SBTi) goals.


The SBTi Corporate Net-Zero standard stipulates that companies with net zero targets must reduce over 90% of their emissions and “use permanent carbon removal and storage” to neutralize the remaining <10% by 2050. Companies can use removal-based carbon credits to counterbalance these residual emissions.

In this article, we’ll take a closer look at:

  • What are carbon credits?
  • How does buying carbon credits fit into a corporate climate strategy?
  • What criteria should you consider when buying carbon credits?
  • How to purchase carbon credits

What are carbon credits?

Carbon credits represent the avoidance, removal, or reduction of one metric tonne (Mt) of carbon dioxide equivalent emissions (CO2e) per credit. These credits are market-based instruments that can be bought and sold as a way to fund climate mitigation projects or counterbalance the emissions that an entity generates. 



For example, if an employee takes a business trip, where the flights generate 10 Mt of CO2e, the company might purchase 10 carbon credits to compensate for the flight emissions. The carbon credit does not directly reduce the emissions from this flight or necessarily make the flight sustainable, as the better environmental option could be to skip the flight entirely. 

Consider the following examples of carbon credit projects across different categories:

  • Carbon avoidance credits: A carbon credit might fund a wind farm as a form of emissions avoidance. Doing so can make renewable energy more affordable, helping others avoid emissions that fossil fuels would have otherwise generated.
  • Carbon reduction credits: Buying a carbon credit could finance a reduction in carbon emissions, such as how landfill methane capture directly reduces emissions that would otherwise end up in the atmosphere.
  • Carbon removal credits: Carbon credits can also directly remove CO2 emissions in the atmosphere, such as through carbon capture and storage technologies that pull existing emissions out of the atmosphere and sequester them underground.

How do carbon credits fit into a climate strategy?

Carbon credits should not be a substitute for value chain emission reduction measures. Instead, carbon credits can complement a larger climate strategy that involves establishing climate targets, reducing direct emissions, and addressing unavoidable ones.


An electronics company, for example, may set a 2050 net zero goal and work to directly reduce their greenhouse gas emissions by sourcing renewable energy to power their operations. However, they may choose to purchase carbon credits to address the ongoing impacts of hard-to-decarbonize activities, such as mining metals.

Carbon credits also might fit into a climate strategy based on their co-benefits, many of which map to U.N. Sustainable Development Goals (SDGs). For example, a beverage company’s climate strategy might include goals like supporting SDG 6: Clean Water and Sanitation. The company might purchase carbon credits that fund improved forest management projects that both remove emissions via carbon sequestration and support the water quality of streams and lakes within these forests.

Some organizations are cautious about using carbon credits as part of their climate strategies due to concerns over being accused of “greenwashing” or delaying “real” climate action. This is why carbon credits must be used as a complement to, rather than a substitute for, value chain emissions reductions. Companies should also make accurate, transparent, and specific claims about how they use carbon credits, without overstating climate impact. In other words, carbon credits should not defer action on climate change, but they can be used to support climate action beyond what can be accomplished through reductions alone, such as by addressing unabated emissions.

What criteria should companies consider when procuring carbon credits?

To procure high-quality carbon credits, you want to make sure that your purchase meets the following key quality criteria:

  • Field ecologist taking measures carbon in forests and track greenhouse gas emissions for monitoring biodiversity and forest condition.

    Additionality: Additionality means that the revenue from purchasing carbon credits provides a meaningful incentive to the project, allowing them to avoid, reduce, or remove GHG emissions beyond what would have occurred without the carbon credit funding.

  • Durability/Permanence: A high-quality carbon credit should also have durability, also called permanence. This means that projects that sequester and store carbon in natural or geologic reserves must be supported by measures to protect or insure against reversals over a specified period.

  • Quantification: A high-quality carbon project should provide clear quantification of emissions benefits in comparison to the baseline of what would have occurred if the project did not exist.

  • No double-counting: If more than one organization claims a carbon credit, then the emissions benefits would be overstated. Organizations need to ensure that any credits purchased will not be double-counted. This can be done by purchasing third-party verified carbon credits that are properly accounted for and retired by a carbon registry after procurement.

  • Co-benefits: Co-benefits, also referred to as sustainable development benefits for those that align with SDGs, provide additional positive outcomes beyond carbon benefits. Some examples of co-benefits can include habitat preservation that supports biodiversity, financial flows to Indigenous communities, and job creation that advances gender equality. Co-benefits are not required for all carbon credits but can be a marker of carbon credit quality as part of an equitable transition to a net-zero economy.

Don’t feel like you need to assess all of these issues completely on your own. You should purchase credits that have already been verified and validated by internationally recognized standards bodies/registries, including the American Carbon Registry (ACR), Climate Action Reserve (CAR), Gold Standard (GS), or Verra. These registries provide oversight to the voluntary carbon market, ensuring that carbon credit projects adhere to independently developed quantification methodologies.

To assess carbon credit quality, you can also look to new third-party standards bodies such as the Integrity Council for Voluntary Carbon Markets (ICVCM), which seeks to establish a global high-quality threshold standard for all credits through its Core Carbon Principles (CCPs). Credits that meet the ICVCM’s elevated quality criteria will be labeled as “CCP-Approved” within registries as early as Q1 2024, although it will likely take at least a year for the majority of existing credits to be reviewed by the ICVCM.

How to buy carbon credits

Organizations looking to purchase carbon credits typically explore online marketplaces or collaborate with climate retail partners. While online marketplaces offer a quick, straightforward procurement route, they may lack the personalized guidance necessary for aligning with broader, long-term sustainability goals.

Working with a trusted climate retail partner can provide a more tailored approach. retail partners often have access to a wider variety of carbon credit projects, ensuring alignment with your company’s overall strategy, such as supporting specific U.N. Sustainable Development Goals (SDGs).

Moreover, retail partners can offer unique financial structures to support carbon credit procurement. This might include making prepayments to finance new projects, securing future carbon credit supply, or taking equity stakes in project development for more direct involvement.
Another key advantage of partnering with a retail partner is the potential for procuring larger volumes of carbon credits at more competitive prices. Unlike the one-size-fits-all nature of marketplaces, retail partners can negotiate and source projects that cater specifically to your company’s needs and budget.

Ultimately, the choice between a marketplace and a retail partner should be informed by your organization’s specific climate strategy and sustainability objectives. A retail partner’s expertise can be particularly valuable in crafting a comprehensive approach that not only meets your immediate needs but also positions you strategically for future sustainability endeavors.

Interested in integrating carbon credits into your organization’s comprehensive climate and sustainability strategy? Reach out to us at 3Degrees. Our experienced carbon team, specializing in project development, procurement, and advisory services, has successfully facilitated the procurement of over 14 million carbon credits globally. We’re not just about transactions; we’re about tailoring solutions that fit your unique sustainability vision. Contact us today, and let’s explore how carbon credits can become a pivotal part of your climate action plan.

FAQs

Curious about buying carbon credits but still have questions? Take a look at these FAQs.

How do carbon credits work?

Carbon credits work by funding projects that avoid, reduce, or remove the equivalent of one metric ton of carbon emissions per credit. When a project developer achieves this carbon benefit, such as by planting trees to remove emissions or building out a wind farm to avoid fossil fuel emissions, they work with a third party, such as a carbon registry, to verify the project’s legitimacy before selling it. 



A high-quality carbon registry ensures that a carbon credit meets criteria such as having additionality, meaning the emissions benefits would not have occurred without funding from selling the carbon credit. The registry also ensures that the project is properly accounted for, such as by verifying that only one buyer claims the credit to avoid issues with double-counting emissions benefits. 



How do you buy carbon credits?



For companies wondering how to buy carbon credits, the answer depends on what type of carbon credits you procure.

If you want an off-the-shelf carbon credit that doesn’t necessarily have co-benefits, you can purchase carbon credits from a carbon credit marketplace/broker. Or, you could work with a climate consultant to source more unique carbon credits that align with your corporate sustainability strategy.

For more about buying carbon credits and understanding how carbon credits work, see our article on carbon credits FAQs.