PanXchange Blog – July 2021
In order to create a project to generate carbon offset credits, there are generally 5 key steps to follow which often span a lengthy timeline (an unfortunate reality when carbon credit prices are on the rise). In this edition, the PanXchange team explores options for agricultural players looking to get a head start and shorten the timeline to generate carbon offset credits, as well as the potential risks involved.
The most basic framework to generate carbon offset credit as per the Clean Development Mechanism (CDM) guidelines is as follows:
Step 1: Create a Project Design Document (PDD)
While templates may vary, the general “recipe” is the same. This document includes the results and details of:
- The overall design of your emissions offset project
- The project’s feasibility study
- The methodology used (if one does not already exist, you must create one with the CDM)
- Stakeholder consultations (to ensure no parties are adversely affected by the project).
Step 2: Validate and Register the Project:
An approved 3rd party validator (often an environmental engineering firm) confirms your project is eligible for credits based on program rules. The credit seeker may find a validating firm on their own, or may have one recommended to them by an offset program and registry provider. The validated project is submitted to CDM’s executive board for registration; a process where an official record is made to avoid “double counting” of offset projects and/or credits.
Step 3: Start Your Project
Note: The offset project may start at any time, but starting before validation carries a risk of rejection.
Step 4: Monitor & Verify Emissions Reductions
Monitor your project and maintain records quantifying the emission reductions achieved in accordance with the project design document (PDD). A 3rd party verification firm conducts a monitoring step as an audit to promote project integrity. As well, to minimize conflict of interest, the validating auditors and verifying auditors must be different firms. These firms are listed on the websites of providers of carbon offset programs including Verra, American Carbon Registry, and Climate Action Reserve.
Step 5: Certify and Sell
The verification report is submitted to the CDM Executive Board for certification and issuance of offset credits. A project developer can sell the offset credits from a project to a buyer via a contract, or “retire” the credits by using them to offset GHG emissions.
A purchasing contract for the credits can be signed at any stage during the project development cycle. Given high demand for credits, we anticipate that most will be sold before the projects are fully completed. While there are a number of other other relevant programs, registries, and related entities beyond the CDM, the framework following these 5 key steps is relatively consistent across the board.