How to select a high quality climate project?

Exploring carbon credit types

7 min readFeb 1, 2023

Carbon credits are of great importance to reach net zero. However, with so many climate projects available, it can be difficult to know where to start.

We are dealing intensively with this topic and would like to share with you the most important framework and guidelines. We start with the Oxford Offsetting Principles — a widely used framework that provides advice on what a high-quality climate project should look like.

The Oxford Offsetting Principles are a set of guidelines for businesses, governments, and organizations that are looking to balance out their carbon emissions in a responsible and efficient way. They were published in 2009 by the Smith School of Enterprise and the Environment at the University of Oxford.

The principles are as follows:

Principle 1: Prioritize reducing your own emissions

To make a valid contribution claim, the first principle is to reduce the company’s own emissions and regularly revise offsetting strategies as best practices evolve.

The remaining, hard-to-reduce emissions can be addressed by purchasing high-quality carbon credits. Choose credits that are verifiable and correctly accounted for, have a low risk of non additionality, reversal, and creating negative unintended consequences:

Additionality: Is the project justified and what would have happened if the project didn’t exist? Additionality is the property of an activity being additional by adding something new to the context. It is a determination of whether an intervention has an effect when compared to a baseline (e.g. continuing business as usual). Projects should demonstrate that the carbon emissions reductions achieved by the project would not have occurred without the additional funding.
Permanence: How is the project protected and how long is carbon stored? Projects should demonstrate that the emissions reductions achieved by the project will be permanent. This means the carbon must remain stored for a long enough period to achieve the intended climate benefit. For example, if trees are logged or burned down, the carbon sequestered by the tree will be released back into the atmosphere. Therefore, it is important to ensure that the carbon sequestered by a project will remain stored for a sufficient period of time.
Verification: How much carbon are the carbon sinks storing? Verifying offsets ensures that the emission reduction or carbon removal actually takes place, and that all forms of double-counting, including double-claiming of the emission reduction benefit, are avoided. Projects that are verifiable and correctly accounted for, have a low risk of non-additionality, reversal, and creating negative unintended consequences. Reputable standards that register and verify projects are Gold Standard, VCS Verra, Plan Vivo, Climate Action Reserve and American Credit Registry. Projects that are not certified under these standards may be able to meet robust quality criteria but may require a greater degree of due diligence on the purchaser’s behalf to verify quality.
Co-benefits: carbon offset projects that have additional co-benefits such as poverty reduction, biodiversity conservation, and sustainable development should be prioritized over lower-quality projects or projects that create negative unintended consequences.

Principle 2: Focus on carbon removal projects

Carbon projects can be categorized as removal or avoidance projects.

Avoidance projects focus on preventing the release of greenhouse gases into the atmosphere, while removal projects, as the name suggests, actively remove greenhouse gases from the atmosphere.

A nature based removal project includes a project to plant trees to absorb carbon dioxide, while an example of an avoidance project focuses on conserving and restoring mangroves.

“Next to turning off the carbon tap, we need to empty the pool. With avoidance projects, the output remains in the system. One plus zero. To reach net zero, we need negative emissions. Only carbon removal can make these ambitions a reality. Plus one, minus one. Companies who are aiming to become climate positive, can prioritize carbon removal projects over avoidance projects.” — Adrian Wons, Co-founder of senken.

When you look at the difference between technology-based and nature-based solutions, technology-based solutions offer the advantage of being easy to monitor. However, the main drawback is the high costs of implementing these solutions on a large scale. Nature-based solutions (NBS) on the other hand, provide a low-cost option for CO2 removal and have no technological risk, but are harder to monitor, and the permanence of carbon sequestration is uncertain. The cost of LLC for technological based solutions range from 17–800$ per ton C02, while nature based solutions range 5–50$ per ton Co2.

Principle 3. Focus on long-lived storage

Besides selecting projects that are real, measurable, additional, permanent and verifiable, offsets need to come from activities that store carbon permanently, with very low risk of reversal. Reversal, also known as leakage, means that the generation of carbon credits should not lead to an increase in emissions elsewhere. To understand this risk, we need to ask ourselves whether carbon is stored, how it is stored, and for how long.

Based on Oxford’s classification scheme, five types of carbon types can be distinguished.

Taxonomy of carbon credits. Source: University of Oxford

If carbon is not stored, this is a clear sign of a classic emission reduction project. (Type 1). Renewable energy and cleaner cookstoves fall under this category.

When carbon is “stored” short-lived, meaning in terms of decades, it includes projects that avoid damage to natural ecosystems or modified agricultural practices that retain already stored carbon in the soil. (Type 2️). Long-lived storage, meaning in terms of centuries to millennia, includes projects that require the physical storage of carbon, e.g., by installing carbon capture and storage (CCS) at industrial facilities or power plants. (Type 3️)

Naturally, the same question applies to removal projects. Again, a distinction is made between short-lived storage (e.g Afforestation & Reforestation, Soil Carbon Enhancement, or Ecosystem Restoration projects. (Type 4️) and long-lived storage, which includes bioenergy with carbon capture and storage (BECCS), direct air capture with geologic storage (DACCS), or mineralization projects. (Type 5️).

How to create a portfolio for climate assets

Oxford Principles suggests building a portfolio that contains different climate projects containing a diversifying between a variety of carbon credits types (avoidance and removal, short-lived and long-lived storage), and shift this combination to higher impact projects along the way. Below an example of how a climate asset portfolio could look like.

Example net zero trajectory. Source: University of Oxford

Conclusion

The Oxford Offsetting principles are a valuable tool for establishing a basic framework for carbon reduction efforts. They have gained widespread recognition and provide valuable guidance for those looking to balance out their carbon footprint. Whether you are looking to support climate projects for voluntary climate action or aim to balance out hard-to-avoid residual emissions to comply with regulations, the principles should definitely be considered as a starting point. By following these guidelines, anyone who is interested in investing in climate assets and building up a carbon credit portfolio can be ensured that their efforts are making a meaningful contribution to mitigating the impacts of climate change and promoting sustainable development.

About senken

Senken is an easy-to-use platform to access the largest selection of climate assets for transparent climate actions and finance. With senken, we want to make it easier for companies and investors to support regenerative climate projects by buying verified carbon credits. senken provides additional security and transparency at the data level to ensure the quality and integrity of each project.

Confidently purchase trade and retire carbon credits to reach your companies’ net-zero ambitions.