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The co-benefits of carbon-finance projects have been discussed for many years, but the launch of the Sustainable Development Goals has inspired plans to monitor and verify the sustainable development outcomes beyond carbon emissions. Oliver Crouch evaluates the progress.
The beyond carbon impacts of emission reduction projects have long been a key driver for corporates using carbon-finance projects to meet their emissions targets, with the co-benefits frequently being an important part of the project selection criteria. The carbon credit provides the robust mechanism of monitoring and verification, but it is the local impact on communities or biodiversity that interests many businesses. For Microsoft, providing energy access to underserved global communities is a key goal in the selection of projects in their offset programme. For M&S, a link with communities in their supply base is important.
The holy grail for projects and clients is to put a number or value to these additional impacts. Research carried out by Imperial College London in 2014 looked at approximately 50 projects and estimated that for each tonne of carbon reduced the additional impacts to communities, households and biodiversity was worth $664. To evaluate and communicate these beyond carbon impacts of individual projects, Natural Capital Partners has developed its Sustainable Impacts framework. We use this framework when we create portfolios of projects on behalf of our clients, enabling them to understand and optimise the impacts that best align with their broader business and sustainability objectives.
The voluntary carbon market reflects this value through differentiated prices. The ability to generate wider co-benefits has long made it an innovation hub for new methodologies while the compliance market was only ever concerned with the least cost reduction.
Results-based finance is reflected in the price of tonnes within the voluntary market. The chart from Ecosystem Marketplace State of the Voluntary Carbon Market report in 2015 illustrates unit prices ranging from $2 for wind to over $10 for grassland management, with various other options in between. The simplest interpretation is that co-benefits are up to five times more valuable to corporate buyers than the underlying emission reduction. Even at these multiples, the Imperial College study makes this look like excellent value relative to the value of these impacts for our planet and society.
In 2015 the United Nations Sustainable Development Goals (SDG) set the global development priorities out to 2030. We know from our Sustainable Impacts work that many of the benefits delivered by carbon projects align with the SDG goals, so there is an excellent opportunity for the carbon market to leverage this interest. This is exactly the opportunity that the Gold Standard is looking to capture with the release of version 3.0, by positioning Gold Standard as a solution to make the Sustainable Development Goals a reality.
The Gold Standard recently convened their stakeholders to explore version 3.0 which aims to provide a unifying project standard for the certification of demonstrable sustainable development contributions beyond climate mitigation. The new standard will have the potential to issue multiple instruments or credits (e.g. carbon and water and health) from one project and enable the certification of impacts or outcomes where there is no desire to monetise this through credits or certificates. If successful, Gold Standard 3.0 will take the concept of results-based finance to a whole new level.
It is a bold evolution for the Gold Standard but there’s a realistic timeline to develop and road test the plan on pilot projects before coming into full effect over the next two to three years. The Gold Standard will rely on collaboration to develop the necessary methodologies and has announced they are working with the Global Alliance for Clean Cookstoves to develop a methodology for quantifying Black Carbon; collaborating with the World Bank on a methodology to determine health impacts; and with the Grand-Duchy of Luxembourg to develop gender equality metrics.
Having applied our Sustainable Impacts framework at a project level over the last three years, we are in no doubt about the enormity of the technical challenge that lies ahead for the Gold Standard in making version 3.0 a reality. Nevertheless, evaluation of the multitude of development outcomes that projects deliver is an objective we remain committed to. We welcome the focus Gold Standard has brought to this challenge with version 3.0 and are already working with our partners and clients to unlock the opportunities this evolution will create.