OPINION: How the removals versus avoidance binary loses sight of impact
Quantum Commodity Intelligence – Jess Roberts is vice president of ratings at carbon data provider Sylvera.
In the past few years a wave of measures to uphold integrity and correct woes of the voluntary carbon market (VCM) have taken shape – all overwhelmingly positive.
However, there is a recent trend of pitting removals against avoidance and nature against tech. In particular, the perception that removals credits are higher quality than avoidance credits has emerged as an unintended byproduct of this drive toward integrity and quality.
A recent survey conducted by Sylvera found that VCM buyers favour investing in removals projects, both at the issuing and pre-issuance stages. More than half of credits purchased by respondents from now to 2030 will be removals.
Harmful perception
Adding to this harmful perception, the Science Based Target Initiative (SBTi) guidance around net zero pathways focuses on removals, after decarbonisation, and demarcates avoidance and reductions as a part of 'beyond value chain mitigation' and voluntary, which implies that avoidance is a subordinate credit type.
The perception that removals are more reliably higher quality is not true and it is harming investment into real climate action. Removals can face the same issues with carbon accounting, additionality, permanence, safeguarding and co benefits, just as avoidance credits can; and avoidance credits can just as easily drive real climate impact.
Removals do perform a subtly different role in helping to undo some of the damage that's been done and are important for going beyond the 'net' in net zero, eventually.
However, the fact remains that it is necessary to invest in both quality removals and avoidance in the face of the immediate climate crisis. The false equivalence of 'removals' to mean 'quality' has contributed to major price disparities between the two, even for similarly perceived project types, such as blue carbon.
Continuing to delineate between removals and avoidance when it comes to guidance, quality, and claims increases complexity for buyers and holds back progress in the VCM unless registries acknowledge this challenge and innovate to prevent it.
This paradox is having ripple effects through mixed-type project credits as well, pushing buyers wanting to buy 'just' the removals credits from projects such as REDD+, wetlands restoration and conservation, and improved forest management (IFM).
Typically, these project types sell credits on the basis of net carbon change in a project area, which results from the summation of avoided emissions from the business-as-usual scenario and enhanced sequestration in the project scenario.
Increasingly, the carbon accounting methodologies attempt to delineate these two sources of carbon credits, but the on-the-ground reality is that carbon accounting complexities and scientific uncertainties can make the delineation unreliable.
Different prices
Mixed-type projects often command higher prices if they're perceived to be more removal than avoidance, as recent pricing data demonstrates.
Take prices for peatlands credits in Indonesia, for example. The credits with a higher percentage of removal afforestation, reforestation and revegetation (ARR) in their mix command $21 a credit, versus those with 90% REDD avoidance in their makeup trading at $15 a credit.
If we continue to falsely correlate removals to mean quality and avoidance to mean junk, the market risks losing some of the recent gains made in project transparency as developers could try to find creative ways to brand projects as 'removals' attract higher prices in the market.
Further complicating things, registries hosting mixed-type projects do not always label the credits according to their type. As a result, investors may make misleading claims, even unintentionally.
Reputation risk
When an investor buys a credit from a project, they cannot be sure that that credit is attached to a specific activity or credit type, avoidance or removal, unless it is labelled as such. Therefore, an investor should not make a specific claim on that basis, because there's no guarantee that another investor will not just do the same, risking their investment or their reputation.
To correct this, registries have a role to play and can better separate credit types to discourage double claiming, or offer mixed-credit type credits to protect the division at the project level.
Investors in the market should confirm if registries separate these credit types, and if not, be wary of making claims. US-based ACR introduced 'Verified Removals' in 2022 and recent changes, such as Verra's revised IFM methodology which accounts for removals and avoidance credits separately, are steps in the right direction but the industry needs this on a much grander scale with increased buyer awareness
In addition, investors need to conduct deep due diligence to understand the real impact of a specific project's activities because quality ranges broadly. Project type or activity alone is not an indicator of quality – investors need to account for the holistic picture of each project.
VCM engagement
New compliance measures, disclosure rules, and more pressing net zero targets will push more companies to engage with the VCM for the first time.
As more participants come to the market, we need to guide them toward prioritising investment into impact.
While that starts with education, we need to ensure the standards, guidance, and infrastructure of the market point them in the right direction, rather than lead them toward false proxies for "quality" of credits.
