The Importance of Being Additional

By Jennifer Weiss, Vice President, Communications and Business Outreach, Climate Action Reserve

(originally posted on CaliforniaCarbon.info) (read in Spanish)

In order for greenhouse gas (GHG) emissions reductions to earn offset credits, the GHG reductions must be real (have actually occurred), permanent (provide lasting benefits to the environment, often defined as 100-years of sequestration or reduction), verified (reductions are confirmed by an independent, accredited third party), enforceable (reductions are subject to penalties for non-compliance and reversal), and additional (reductions occurred because of the incentives associated with the carbon market and are above business as usual practices).

Additionality is a key tenet of a carbon offset project. Carbon offsets represent GHG reductions that have been achieved through voluntary implementation as a result of the financial incentives provided by the carbon market. By requiring that offsets are not generated for GHG reductions that would have occurred anyway and issued only for activities above business as usual, additionality provides value and credibility to carbon offsets and carbon markets.

So how can additionality be determined?

Performance standard vs individual project financial analysis

The Reserve employs the performance standard threshold to assess project additionality. Under the performance standard approach, research is conducted up front to determine common practice and activities above common practice. GHG reduction activities that fall within the “business as usual” class are presumed to be financially viable without access to GHG credits, meaning they are not additional. GHG reduction activities above and beyond business as usual activities are presumed to be additional. Benefits of employing a performance standard for offset programs include:

More streamlined, objective, and efficient: The development of a performance threshold is a data intensive endeavor, but once the threshold is established it provides a more streamlined, objective, and efficient means for determining project additionality than the financial examination of individual projects. If a project engages in GHG reduction activities pre-determined to be above business as usual, then the project is additional.
Rigorous, transparent, multi-stakeholder approach involving the public: Reserve protocols are developed under a rigorous, transparent, public, regulatory-quality process involving extensive research, multi-stakeholder workgroups, and public comment periods. The Reserve works with stakeholders to identify activities that achieve GHG reductions within a sector, research common practice, conduct field interviews regarding opportunities and obstacles for the GHG reduction activities, engage with scientists and thought-leaders regarding best available technologies and best environmental practices, and analyze existing and anticipated regulatory and legislative requirements to determine the business as usual or baseline conditions.

Project-level financial additionality assessments may seem like a valuable barrier analysis for proving the additionality of projects; in practice, requiring such assessments is counter-productive, for the following reasons:

Sensitive to assumptions: The practice of project level financial additionality assessments is subject to numerous assumptions by the project developer that can lead to different conclusions. Assumptions include variables such as capital costs, operation and maintenance costs, energy costs, inflation rates, targeted rates of return, perceived value of any credits, etc. Financial analysis of any potential project can be extremely sensitive to such assumptions.

Rigorous financial analysis of any potential investment typically involves the development of a wide variety of sensitivity analyses that vary key assumptions to understand the risks underpinning any investment. Deciding which sensitivity analysis to select as one’s primary case is an art, not a science.
Administrative burden without benefits: Carbon offset programs that rely on financial examination of individual projects face a significant administrative burden for no tangible environmental benefit, thereby making participation in carbon markets even more inaccessible for the critical projects that sorely need carbon finance.
Market barriers, including lack of funding: A stark reality of climate mitigation is the fact that there are many market barriers to investing in high-quality projects, even if a project may appear economically viable in its own right. One of these well-documented barriers is lack of access to capital. There are trillions of dollars needed to bring these projects to fruition and international climate goals will not be reached if this significant group of projects is discouraged from climate finance.
Could still have questionable results: Specification of individual project level financial additionality was initially the primary requirement for any projects under the CDM. For a variety of reasons, there was enormous pushback from many quarters regarding the unworkability and unreasonableness of a project-level financial additionality standard. Throughout the CDM’s history there were numerous examples of the individual project level financial additionality requirement leading to questionable results.

The Climate Action Reserve has taken a standardized baseline approach to development of our protocols to address the question of financial additionality and take this aspect of project development out of the hands of project developers, who may have the incentive to select the financial scenario that best supports maximizing the quantity of credits (or receiving any credits at all). Our high quality credits represent the credibility, value, and efficiency of setting a high quality performance standard for GHG reduction activities.

When considering offsets and the processes under which they were developed and issued, it’s critical to look at the level of additionality and the method used to determine the additionality. Offset credits that are not additional are not true offset credits.

La importancia de la adicionalidad

Por Jennifer Weiss, Vicepresidenta, Comunicaciones y Alcance Comercial, Reserva de Acción Climática

Existen diversos principios que dotan de integridad a los programas de compensación de emisiones de gases de efecto invernadero (GEI). En este aspecto, para que las reducciones de GEI generen créditos de compensación, estos deben proporcionar reducciones de GEI reales (garantizar que las reducciones de emisiones realmente ocurran), permanentes (proporcionar beneficios duraderos para el medio ambiente, generalmente a través de un compromiso a 100 años de secuestro o reducción de emisiones), verificables (reducciones monitoreadas por un tercero independiente y acreditado), ejecutables (reducciones sujetas a sanciones por incumplimiento y revocación) y adicionales (reducciones establecidas debido a los incentivos asociados con el mercado de carbono e independientes de las prácticas comerciales habituales).

La adicionalidad es un principio clave en los proyectos de compensación de carbono, ya los créditos de compensación representan las reducciones de GEI que han sido implementadas de manera voluntaria a través de incentivos financieros proporcionados por el mercado de carbono. Al exigir que los créditos de compensación sean emitidos por actividades que superen las prácticas comunes –también llamado bussiness as usual– es decir no se generen por reducciones de GEI que se habrían producido normalmente, la adicionalidad proporciona valor y credibilidad a la compensación de carbono y mercados de carbono.

¿Cómo se determina la adicionalidad?

Estándar de desempeño vs. análisis financiero de proyectos individuales

La Reserva utiliza el umbral de la prueba estándar de desempeño para evaluar la adicionalidad de un proyecto de compensación de emisiones. Bajo este enfoque, se realiza una investigación previa para determinar y clasificar las actividades de “práctica común” y las actividades por encima de la “práctica común”. En este sentido, las actividades de reducción de emisiones de GEI que se clasifican como de “práctica común” no son adicionales y por tanto no tienen posibilidad de recibir créditos de compensación; por el contrario, las actividades de reducción de GEI por encima o más allá de una práctica común o bussiness as usual son clasificadas adicionales y por tanto pueden recibir créditos de compensación.

A continuación, se destacan los beneficios de emplear una prueba estándar de desempeño para los programas de compensación de emisiones:

Una evaluación más simple, objetiva y eficiente:
El desarrollo del umbral de estándar de desempeño es un esfuerzo intensivo de recolección y evaluación de datos, pero que una vez que se establece, proporciona un medio más simple, objetivo y eficiente para determinar la adicionalidad de un proyecto, esto en comparación con el examen financiero de proyectos individuales. En este aspecto, un proyecto es adicional cuando se incluyen actividades de reducción de GEI predeterminadas para estar por encima de las prácticas comerciales habituales o practicas comunes.
Enfoque riguroso, transparente y de diversas partes interesadas que involucra al público:
Los protocolos de la Reserva se desarrollan bajo un proceso riguroso, transparente, público y de calidad regulatoria que involucra una investigación exhaustiva, grupos de trabajo de múltiples partes interesadas y períodos de comentarios públicos. De esta forma, la Reserva trabaja con las partes interesadas para identificar actividades que logren reducciones de GEI dentro de un sector en específico, investigar prácticas comunes, realizar entrevistas de campo sobre oportunidades y obstáculos para las actividades de reducción de GEI, interactuar con investigadores y líderes intelectuales sobre la mejor tecnología disponible y las mejores prácticas ambientales, así como analizar los requisitos reglamentarios existentes y anticipados para determinar las actividades de prácticas comunes o condiciones con el establecimiento de condiciones de línea base.

Las evaluaciones de adicionalidad financiera a nivel de proyecto pueden parecer un valioso análisis para evaluar la adicionalidad de los proyectos de compensación. Sin embargo, en la práctica, exigir tales evaluaciones puede ser contraproducente, por las siguientes razones:

Sensible a las suposiciones:
La práctica de las evaluaciones de adicionalidad financiera a nivel de proyecto está sujeta a numerosas suposiciones por parte del desarrollador del proyecto, que incluyen variables tales como costos de capital, costos de operación y mantenimiento, costos de energía, tasas de inflación, tasas de rendimiento objetivo, valor percibido de cualquier crédito, etc. Por tanto, el análisis financiero de cualquier potencial proyecto puede ser extremadamente sensible a tales supuestos y conducir a diferentes conclusiones.

El análisis financiero riguroso de cualquier inversión potencial generalmente implica el desarrollo de una amplia variedad de análisis de sensibilidad que involucra los supuestos clave para comprender los riesgos que sustentan cualquier inversión. Decidir qué análisis de sensibilidad seleccionar como caso principal es un arte, no una ciencia.
Carga administrativa sin prestaciones:
Los programas de compensación de emisiones que se basan en el análisis financiero de proyectos individuales enfrentan una carga administrativa significativa sin ningún beneficio ambiental tangible, lo que hace que su participación en los mercados de carbono sea más inaccesible para los proyectos críticos que necesitan urgentemente financiamiento de carbono.
Obstáculos de mercado, incluida la falta de financiación:
Una cruda realidad de la mitigación climática es el hecho de que existen muchas barreras de mercado para invertir en proyectos de alta calidad, incluso si un proyecto parece económicamente viable. Una de estas barreras es la falta de acceso al capital, dado que se necesitan billones de dólares para llevar a cabo de estos proyectos a nivel internacional, como consecuencia, los objetivos climáticos internacionales no se cumplirán si se bloquea la financiación de este importante grupo de proyectos.
Resultados cuestionables:
La adicionalidad financiera a nivel de proyecto individual fue inicialmente un requisito principal para los proyectos bajo el Mecanismo de Desarrollo Limpio (MDL). Sin embargo, a lo largo de la historia del MDL tuvo un enorme rechazo de diversos sectores con respecto a falta de viabilidad y racionalidad del estándar de adicionalidad financiera a nivel de proyecto, que además condujo a resultados cuestionables.

En respuesta a lo anterior, la Reserva de Acción Climática ha adoptado un enfoque de referencia estandarizado a fin de abordar la adicionalidad financiera para el desarrollo de protocolos y quitar este aspecto de las manos de los desarrolladores de proyectos, quienes tienen el poder de decisión para seleccionar el escenario financiero que mejor respalde la cantidad de créditos (o recibir cualquier crédito). Los créditos de compensación de alta calidad certificados por la Reserva representan credibilidad, valor y eficiencia, así como estándares de desempeño de alta calidad para las actividades de reducción de GEI.

Al considerar los procesos bajo los cuales se desarrollaron y emitieron las compensaciones de emisiones, es fundamental tener en cuenta el método utilizado para determinar la adicionalidad. Recordando siempre que los créditos de compensación que no son adicionales no son verdaderos créditos de compensación.

Mexico Forest Protocol Version 3.0 draft available for public comment

The Reserve has released a policy memo regarding the transition to GWP values from IPCC AR5 for all offset protocols.

Tips for a climate-friendly summer

This summer is predicted to be a “summer of disasters” – with extreme heat, hurricanes, droughts, and wildfires. To combat the doom and gloom, here is a list of helpful ideas on how to have a climate-friendly summer:

	Camp instead of staying at a hotel. Not only will you be closer to nature, but your vacation will have a lower energy and emissions profile.
	Beat the heat by taking cooler showers.
	Reducing showers to 10 minutes can help save hundreds of thousands of gallons of water per year.
	Fans can cool a room up to 10 degrees! Consider open windows at night then closing them in the morning and turning on fans to keep rooms cool. They use much less power than traditional ACs!
	If you have the space, plant trees! In urban areas, “heat islands” exist in spaces where no trees are planted, and in many places (like Los Angeles) organizations will give you up to 4 free trees to plant on your property. https://www.treepeople.org/ https://www.sunset.com/home-garden/plants/where-to-find-free-trees https://www.cityplants.org/
	Reduce electrical use during the day. Using natural lighting and using less electricity during peak hours can help reduce strain on the electrical grid and, in turn, cause less black outs, brown outs, and even wildfires.
	Cover up with UV protection clothing, when possible, instead of wearing sunscreen. This can reduce chemical pollution and also reduces single-use plastics.
	Stay hydrated in the heat with reusable water bottles!
	Summer can be a good time to walk or bike commute.
	Shop for the ultimate local produce by gardening! Gardening greens our environment via the addition of plants, flowers, fruits, and vegetables, and can improve air and soil quality. In addition to growing your own food and beautifying your space, gardening also supports local wildlife and pollinators.
	Travel more sustainably: before you make a local trip to a neighboring town for a weekend activity or event, see if there are options to take a bus or train instead of driving. If that’s not an option, see if you can carpool!
	For someone like me who is thrilled to put all my winter clothes away but am realizing none of my summer clothes from last year fit, I’m in need to go secondhand shopping for new summer digs! There are plenty of cool tank tops, summer dresses, shorts, you name it at thrift stores or your nearby Goodwill that are looking for new homes. Not only that, but you will save money by buying secondhand.
	Hit up the farmers market instead of your national grocery chain: again, summer is the best time of year for fresh produce that is not as easy to come around in the winter months. Take advantage of local produce and farmers markets, which also connect you to your larger community and people in your neighborhood.
	Summer BBQ food choices: we all look forward to BBQs, especially good ole 4th of July. This year instead of grilling up your typical cheeseburgers and hot dogs, try going without the meat! What do you think about vegetable stir fry? Did you know you can grill a pizza with fresh dough right on your grill? Try it out! You get extra bonus points for using reusable containers, utensils, and plates.
	If you have the space in your backyard, put up a drying line and hang your wet clothes out from the washing machine. What better way to get that fresh scent into your clothing that people pay to do!
	If you’re one of the 72 percent of Americans planning a summer trip, consider offsetting your vacation emissions! Many airlines offer the option to offset your flight emissions during checkout or you can use an online emissions calculator to determine the emissions from your transportation and energy use and find a reputable retailer to support emissions reductions in the sector and location of your choice.

The Climate Forward Avoided Wildfire Emissions Forecast Methodology is available for public comment

Climate Action Offsetter: Diamond Packaging

Q&A with Diamond Packaging, who recently retired offsets from the Reserve offset registry

1. Please tell us more about your organization?

Founded in 1911, Diamond Packaging is a WBENC-certified woman-owned business specializing in developing innovative and sustainable packaging solutions. Utilizing state of-the-art technologies, Diamond designs and manufactures paperboard folding cartons for the personal care (cosmetics, hair care, skin care, fragrance, oral care, and shaving), health care, pharmaceutical, cannabis, and consumer electronics industries.

Diamond differentiates itself through award-winning creative design, packaging innovation/technical expertise, and its greenbox sustainability initiative.

Diamond recently announced it has been awarded a Platinum rating by EcoVadis, the leading global advocate for sustainability and corporate social responsibility (CSR). The award is the highest recognition given by EcoVadis and places Diamond in the top 1% of all companies evaluated worldwide. Diamond is the ONLY U.S.-based folding carton supplier to receive this distinction.

“We’re very proud of this recognition as it affirms our commitment to sustainability and value as a supply chain partner,” said Dennis Bacchetta, director of marketing and founding member of Diamond’s Green Team.

Diamond ranked in the top 1% of suppliers assessed by EcoVadis in the category “Manufacture of corrugated paper and paperboard and of containers of paper and paperboard”. Diamond ranked highest in the Environment category, which comprises both operational factors (e.g., energy consumption, waste management) and product stewardship (e.g., product use, customer health and safety).

2. What are the key principles and goals of your sustainability program?

Diamond is committed to working toward a cleaner environment. The company developed its greenbox sustainability initiative to research, design, and implement packaging solutions that are innovative and more sustainable.

The core of the initiative – designs, materials, and methods – represents a comprehensive approach to packaging that minimizes environmental impact throughout the supply chain.

Through creative design, careful material selection, and best practices at the plant level, Diamond is able to minimize waste, reduce costs, and increase efficiencies – all of which support a sustainable use of resources and cultivate a positive emotional connection to the brand.

Diamond’s packaging is designed utilizing recyclable or recycled paperboards (many FSC-certified), and manufactured using 100% clean, renewable wind energy, in a Zero Waste to Landfill (ZWL) and Carbon Neutral (covering Scope 1 and Scope 2 emissions) facility.

3. What elements of chosen offset projects helped drive the purchase?

Diamond’s carbon offset purchase is a natural evolution of its industry-leading greenbox sustainability initiative and was driven by the co-benefits of the environmental impact and importance in meeting the company’s long term goals.

In 2021 Diamond announced a multi-year commitment to purchase carbon offsets through Climate Action Reserve (CAR) to reduce its carbon footprint. Diamond’s support of high-quality carbon offset projects will help foster reductions in greenhouse gas (GHG) pollution, support activities that reduce local air pollution, spur growth in new green technologies, and allow emission reduction goals to be met at lower cost.

With the purchase, Diamond is taking a significant step on the path to carbon neutral by offsetting its Scope 1 emissions. Its Scope 2 emissions are already offset through its long-term commitment to wind energy. (Since 2007 Diamond has purchased Green-e certified renewable energy certificates for 100% of its electrical energy requirements.)

Combined, these investments resulted in offsetting approximately 1,447 metric tons of CO2e in 2021.

Diamond facilities are now carbon neutral (covering Scope 1 and Scope 2 emissions), with ongoing progress towards evaluating and mitigating Scope 3 emissions, which include “indirect emissions” both upstream and downstream of the organization’s activities.

4. How have you benefited from using offsets?

The carbon offsets purchase is a natural extension of Diamond’s greenbox sustainability initiative, which has proven to be a powerful mobilizing force that delivers cost savings, provides new revenue streams, and serves to reinforce a more sustainable operations mindset.

Substantial environmental and economic benefits include:

Increased business opportunities with new prospects and strengthens partnerships with existing customers, many of whom share our commitment to cost innovation and sustainability. This has supported 50% sales growth between 2007 and 2021.
Diamond is a recognized sustainability leader through industry recognition and awards.
Diamond has been able to minimize waste, reduce costs, and increase efficiencies – all of which support a more sustainable use of resources and cultivate a positive emotional connection to our brand.

5. What’s next for your organization’s climate and environmental goals?

Diamond’s ‘Green Team’ meets on a regular basis to assess progress and determine short-term goals, including achieving greater manufacturing efficiencies (and the resultant decreased energy demands), and long-term goals, including more comprehensive tracking of Scope 3 emissions with the aim of decreasing or offsetting them. The company also set a series of absolute and intensity targets to reduce its energy and water consumption, plus Scope 1 and Scope 2 emissions for the next 10 years.

Diamond’s continued commitment to reduce carbon emissions and mitigate the business risks of climate change is addressed with science-based targets when measuring its Scope 1 and Scope 2 emissions.

The company has established both absolute and intensity targets against a baseline, and these are being achieved through operational factors, including more efficient production processes, sophisticated HVAC controls, and energy saving methods.

We see this as benefiting our customers, our company, consumers, and of course, the environment.

The updated U.S. Landfill Protocol Version 6.0 is available for project submittal

The Reserve has updated the Soil Enrichment Protocol to version 1.1 – connect with us to earn carbon offsets for agricultural practices that enhance carbon storage in soils

Climate Action Reserve position on tokenization of CRTs

The Climate Action Reserve will continue to prohibit the tokenization of its issued credits, Climate Reserve Tonnes (CRTs). Offset registries play a critical role in upholding rigorous standards that are necessary for offsets to generate true benefits to the climate, environment and communities. Their standards and processes ensure transparency of offset projects and credits, the prevention of credit double counting, the integrity of credits and the ability for anyone, including members of the public, to easily track credits.

Because of these responsibilities offset registries carry and because there currently are no universal standards on credit tokenization that ensure credits’ transparency, integrity and trackability, the Reserve will continue to prohibit the tokenization of CRTs until market integrity can be assured.

During the process to register as a Reserve account holder, all entities are questioned about their intent to tokenize CRTs, and any entity that claims that intent has been turned down for account holder status. In addition to this, the Reserve is updating its legally binding Terms of Use to explicitly state tokenization of any CRT or Registry Offset Credit (ROC) is not permitted. All account holders must agree to the Terms of Use to work with the Reserve.

The Reserve recognizes the role digitization will play in carbon markets and over time intends to implement rules, procedures and infrastructure to ensure the integrity of our credits in this space. Should any change to the policy on tokenization be implemented, Reserve account holders and members of the public will be notified.

—

Posición de la Reserva de Acción por el Clima sobre la tokenización de CRTs

La Reserva de Acción Climática seguirá prohibiendo la tokenización de sus créditos emitidos, las Toneladas de Reserva Climática (CRT). Los registros de compensación desempeñan un papel fundamental en el mantenimiento de normas rigurosas que son necesarias para que las compensaciones generen verdaderos beneficios para el clima, el medio ambiente y las comunidades. Sus normas y procesos garantizan la transparencia de los proyectos y créditos de compensación, la prevención del doble cómputo de créditos, la integridad de estos y la posibilidad de que cualquier persona, incluidos los ciudadanos, pueda realizar fácilmente el seguimiento de los créditos.

Debido a estas responsabilidades de los registros de compensación y a que actualmente no existen normas universales sobre la tokenización de créditos que garanticen la transparencia, la integridad y la rastreabilidad de los créditos, la Reserva seguirá prohibiendo la tokenización de los CRT hasta que se pueda garantizar la integridad del mercado.

Durante el proceso de registro como titular de una cuenta de la Reserva, se interroga a todas las entidades sobre su intención de tokenizar los CRT, y se rechaza el estatus de titular de una cuenta a cualquier entidad que alegue esa intención. Además, la Reserva está actualizando sus terminos de uso jurídicamente vinculantes para indicar explícitamente que no está permitida la tokenización de cualquier CRT o crédito de compensación del Registro (ROC). Todos los titulares de cuentas deben aceptar las condiciones de uso para trabajar con la Reserva.

La Reserva reconoce el papel que desempeñará la digitalización en los mercados de carbono y, con el tiempo, tiene la intención de implementar normas, procedimientos e infraestructura para garantizar la integridad de nuestros créditos en este espacio. En caso de que se produzca algún cambio en la política de tokenización, se notificará a los titulares de las cuentas de la Reserva y a los miembros del público.

Join us Thursday, June 16 for a webinar on: The Role of Reforestation in Carbon Markets through Climate Forward, a program of the Climate Action Reserve