Offset Standards

The International Carbon Removal and Offset Alliance (ICROA) framework for responsible corporate climate action sets out best-practice protocols for high-integrity carbon credits, and the standards for a legacy carbon credit supply.

PanXchange refers to the ICROA core criteria to evaluate the protocols of a credible and high quality carbon offset marketplace. The PanXchange Carbon program methodologies were assessed independently against the ICROA Code of Best Practices and New Standards Endorsement frameworks, and thus are not officially endorsed by ICROA. The intention of this article is to illustrate PanXchange’s program and how it meets, exceeds and/or intentionally differs from ICROA’s standards as we create and develop a new agri-friendly option in voluntary carbon markets.

The ICROA requires that market-based carbon credits represent carbon removals and offsets that are: real, measurable/quantifiable, permanent, additional, independently verified, and unique.

1. Real

PanXchange MEETS the standard definition of “real” carbon removal. Carbon offsets and removals are considered “real” when they can be proven to have occurred. Suppliers in PanXchange’s marketplace provide project information on their carbon removal practices which are measured and independently verified by qualified-third parties. As an additional layer of proof for soil organic carbon projects, PanXchange also leverages tools to allow verifiers to “see” evidence of soil organic carbon stock changes with real satellite observations.

Additional/Supplemental Information:
Farmers currently involved in PanXchange’s carbon program supply information on their agronomic practices from the past three years to establish a confident baseline.
PanXchange incorporates high levels of transparency into all of its operations and activities.
Project supplier profiles and vital project information such as switch dates, Supplier practices, and more are easily accessible.
Platform allows for easy retrieval of data upon permitted request.

2. Verified

PanXchange MEETS the standard definition of “verified” carbon removal.

Existing registries and carbon markets have universally agreed that carbon offsets and removals must be verified to a reasonable level of assurance by a reputable and independent third-party. PanXchange works with the same reputable and independent third parties that are available in existing traditional registries to review suppliers’ project input data as well as carbon quantification model output (if applicable). PanXchange can claim that projects in its marketplace engage in real and measurable carbon removal because independent verifiers ensure that the supplier data provided during the project’s creation is reasonable and correct.

Additionally, independent third parties also verify that a suppliers’ project is not listed in any other registries, thereby preventing double-counting in PanXchange’s marketplace. Finally, independent verification provides PanXchange further peace of mind by ensuring that suppliers have the legal rights to list the project.

3. Measurable

Plant Biomass Projects
PanXchange MEETS the standard definition of “measurable” carbon removal, as it requires empirical sample measurements to obtain a dry-weight carbon stock measurement for plant biomass intended to store sequestered carbon on a long-term basis.

Soil Organic Carbon Projects
PanXchange EXCEEDS the standard definition of “measurable” carbon removal, as it allows for greater visibility into soil organic carbon stock changes and the ability to cross-validate results with other pre-existing models and technologies.

Per ICROA guidelines, offsets and removals must be quantifiable using accepted measurement methods while taking uncertainty and leakage into account. PanXchange utilizes Perennial’s carbon quantification technology for carbon offset projects, which is widely accepted in the voluntary carbon market standard-setting community (i.e. Climate Action Reserve’s Soil Enrichment Protocol (SEP) Version 1.1, released in 2022). Perennial is considered a UN IPCC Tier 1 and Tier 3 carbon stock estimation method, backed by the Microsoft AI for Earth program and the US Department of Agriculture among others.

For instance, methods that classify as measure and model hybrids such as Perennial (the carbon quantification tool deployed by PanXchange) are acceptable under SEP, as it is calibrated and trained with empirical field samples and accompanying data. Rather importantly, per the SEP, model calibration is a separate analytical process from validating model performance and determining model prediction error to prevent the introduction of bias.

The PanXchange program offers a unique insight into leakage, as observable changes (or “fluxes”) in soil organic carbon stock are observable in real time project-wide, which is enabled using remote observation technology. This is a powerful improvement upon the traditional method of modeling leakage using statistical samples and interpolating the “gray areas” in between.

As well, PanXchange seeks to cross-validate its results to maximize the benefits of both remote-observation models and process-based models across the voluntary carbon market. PanXchange cross-validates Perennial carbon offset project results with the USDA’s CarbON Monitoring and Evaluation Tool (COMET). COMET is a US Department of Agriculture-supported incremental soil organic carbon (SOC) stock and GHG emission estimation tool. COMET-Farm is an IPCC Tier 3 carbon stock estimation method that was developed with federal government funding and the support of Colorado State University. The method informs the agriculture subsections of the Land Use Change and Forestry section of the official US GHG Inventory.

To prevent over-issuance of carbon offsets, and to ensure credits represent a meaningful environmental benefit relative to the status quo, credits are measured conservative issuance at a variable percentile below average statistical findings.

4. Additional

PanXchange INTENTIONALLY DIVERGES from the standard definition of “additional” carbon removal. Carbon removal is traditionally defined as “additional” when both the project and the carbon removal would not have occurred without financial support from the market or registry. As well, reading the fine print, “additional” carbon removal must also pass the “common practice test”, meaning that it must not only represent a meaningful change from your baseline, but also the baseline(s) of your peers.

PanXchange defines “additional” as measurable changes in carbon sequestration year over year.

PanXchange believes that a farmer should be rewarded for carbon removal and climate restoration regardless of whether they could have achieved it without climate financing. In this regard, PanXchange opposes the limitation of incentives based on this burden of proof.

As well, it is better to implement regenerative practices late rather than never. PanXchange views the “common practice test“ as a line item that reduces incentives for late adopters of regenerative practices and some of the most meaningful climate-smart practice changes.

5. Permanence

PanXchange MEETS the standard definition of “permanent” carbon removal.

The internationally accepted standard of “permanence” for voluntary carbon offsets is 100 years. PanXchange utilizes a five-year contract period to establish a strong statistical proxy for 100-year permanence supported by third-party verification.

PanXchange determined that a five-year contract was reasonable for projects because:
1) Asking farmers, who often operate on tight profit margins, to sign a multi-decade contract is unrealistic.
2) Farmers who adopt regenerative practices are making a long-term investment in the future and the well-being of their land and soil. The startup and maintenance costs associated with that investment mean farmers are not incentivized to revert to traditional practices at the end of the contract.

PanXchange’s Carbon Program Has Safeguards to Protect Against Overissuance

Overissuance can happen for two primary reasons; model uncertainty, and reversals. Reversals of previously sequestered carbon are a result of breach of contract either intentionally or as a reasonable response to force majeure. In the case of force majeure, PanXchange reserves 10% of earned contract as an insurance buffer to account for this risk. In the event of a contract breach, PanXchange holds the farmer (supplier) liable for generating and/or purchasing offsets deemed equivalent to make the carbon offset balance whole.

In regard to model uncertainty, PanXchange issues credits based on conservative calculations and data inputs, and also holds a model uncertainty buffer to ensure that carbon offsets meaningfully represent a benefit to the status quo.

Furthermore, PanXchange reserves the right to continue to monitor projects after the end of the contract term, and publicly report any significant reversal in carbon retention as well as future mitigation strategies.

6. Unique

PanXchange EXCEEDS the standard definition of “unique” carbon offsets.

Under the PanXchange carbon program, each offset credit uniquely represents one metric ton of removed and stored carbon dioxide equivalent (CO2e) per the ICROA guidelines.

PanXchange is extremely transparent and explicit in its communication regarding the retirement of its carbon credits. PanXchange’s offset inventory tracking, sales, and retirement information is publicly available on PanXchange’s user-friendly online registry.

PanXchange requires every buyer to report where the offset credits are retired on a state/province and national level. This way, PanXchange can transparently report the export of carbon removal sourced from Country A and imported to a retirement destination in Country B which contributes to accurate Paris Agreement (Nationally Determined Contributions) NDC accounting.

It should be noted that PanXchange carbon offsets have a 1-year expiry by default, and upon expiry, offsets are automatically retired. If a location for retirement is not designated, the location of purchase is listed as the retirement destination for the offset.