This year at COP28 over 90,000 participants gathered to discuss and move forward with progressing various actions on climate change including integrating carbon removals into compliance carbon markets and carbon markets into nationally determined contributions. We met with Antti Vihavainen, CEO of Puro.earth on the ground at COP28. Puro.earth is the world’s leading crediting platform for engineered carbon removals and a pioneer in the voluntary carbon market space.
He provided us with some clarity on how the voluntary carbon market works, how the process of verification of carbon credits is being performed, and what are the critical actions needed for the world to achieve true decarbonization. We also interviewed Helen Bray, Vice President of Policy at Puro.earth and added policy-related comments related to COP28 developments for the carbon markets. She also highlighted the need of governments to act on delivering their pledges on climate change response as it is still essentially voluntary.
My first question Mr Vihavainen is a big picture one. How does the voluntary carbon market (VCM) work in terms of verifying the carbon credits? When does the process of verification start and when does it end?
If you look at our general rules, it starts from the delivery of evidence that should prove the supplier complies with the requirements of the methodology. However, that is not all, there is a funnel through which the suppliers go. The carbon credits certification begins with the delivery of the evidence of carbon removed and ends after the auditing, to the issuance of certificates.
There are multiple things that happen prior to the actual certification that can start which involve maturing the project, the documentation, and the laboratory results. All of that has to be collected. Collecting the audit package is basically the long journey before the actual certification. The biggest thing is that the facility has to be up and running as Puro.earth issues only ex post certificates [HH1].
What does the certification process itself involve?
There are a set of requirements in the methodology. It is like a checklist in some areas. Puro.earth checks whether the audit package is complete and it makes sense. There are sort of more qualitative assessments that are included, for example, additionality requirements.
We check them and then we send it off to a third party verifier, who we select and pay for. It is not the supplier who gets to choose their own friend, or somebody that they could perhaps bribe. Then, they make a site visit. Based on that they write two things – an audit report and an audit statement. The audit report is more lengthy, contains more information about what happens. The audit statement only summarizes the end result of the audit.
We then get the audit report and issue the certificates into the registry. At that point, they are available for sale for delivery and retirement.
How do you cover your verification fees?
It’s always the buyer who pays either way. If you go to the US, you see a sticker price that is without the tax and when you go to the counter, the tax gets added to you. It works the same way in our framework. If you go to https://puro.earth/fees/, you will get a full rundown of all the fees Puro.earth collects. They are included in the price the supplier offers to the buyer, so the buyer knows exactly what part of the price is going to grow.
Do the credits you certify currently help companies covered by the EU ETS scheme be exempt from paying carbon taxes in any way?
No, voluntary and compliance markets are two separate systems as of today. We know with only voluntary efforts, we are not going to get to the multi gigaton level of carbon removal per year. Therefore, we work actively with the regulators to include carbon removals as part of the EU ETS. The current version of the EU ETS has a requirement to consider how negative emissions could be considered under the system and we advocate for a review of all options to ensure that emissions reductions are accelerated and at the same time durable carbon removals can be scaled this decade.
Since 2018, the EU Commission has published that the EU ETS gets to net-zero in 2050 and currently it is designed for zero emissions, so we’d welcome that discussion to start in 2024 on – if and how the EU ETS could be designed to deliver net-zero emissions. This should be a top priority for the next EU Commission.
Secondly, Puro.earth is also advocating that governments which earn money with auctioning the emission allowances, will use part of that money for buying carbon removals generated in their own countries. That would again, create a new industry within the countries’ own borders and would in the medium to long term, enable them to develop it into an exporting industry.
What is the progress so far with the integration of carbon removals into the official compliance market schemes of countries?
Helen Bray: In our CDR Policy Meta-Map, we’ve mapped out policies for durable carbon removals globally and as you can see there’s a need for more Government action. We are particularly encouraged by progress in California and also look to other policy measures such as corporate disclosure and environmental claims which could begin to shine the light on the type of carbon credits being used.
We believe there should be like for like principle. If you have fossil fuel emissions they should not be neutralized with something that is impermanent or short term carbon removal.
We also see that the rule-setters for the voluntary carbon market (VCM) have a key role to play such as the global benchmark on the supply of carbon credits from the Integrity Council for the VCM. It was great to see the corporate claims from the VCMI, and the net-zero standard from the SBTi amongst others, announce an end-2-end integrity framework at COP28.
Could you give us a short overview of how you actually guarantee the credibility, or additionality to create the trust in the carbon markets?
Puro.earth follows some of the best practices of the market. When it comes to, for example, additionality, there is less freedom for us to come up with our own definition. We are following the best practices out there. Of course, everything is based on documentation provided by the supplier, which then is verified by the auditor. They are the ones trained to look into those claims and making sure that it is indeed true.
Is there a process that follows after the credit has been issued and registered after a certain period of time to check if the carbon stays removed?
That is built into the guiding principles on how we select the methodologies in the first place. We only work with methodologies or processes, where the risk of reversal is minimal or even non existent. Therefore, there is very little need for monitoring. This is true for all but one methodology and that is the terrestrial storage of biomass. There is a 100 years sort of monitoring required.
About biochar in particular, is there a monitoring process?
We know biochar decomposers as time passes, but we know how that happens. We know what are the factors that affect the degradation rates. We only certify the inert part of biochar that science shows will stay over 100 years. For example, if you put in 100 units of biochar into the soil and at the end of 100 years, there is 70 units left, we only issue [HH2] certificates for the 70 points, or 70 units. This is called pre issuance deduction.
What are your main takeaways from COP28 in terms of CDR market developments?
Helen Bray: The response to the Global Stocktake has a reference to net-zero by 2050, which in the Paris Agreement drafted eight years ago is phrased as net-zero by the second half of the century, so this feels like increased ambition and a need to move quicker. The response also references removals and a transition away from fossil fuels. We hope to see action from Governments to deliver this response because the structure of the Paris Agreement is all about bottom-up action through national pledges.
At the same time, we see a potential delay in the world being able to agree how to trade carbon credits and therefore more focus on the voluntary carbon market in providing essential finance to CO2 removal suppliers. We are therefore focused on our application to the Integrity Council for the Voluntary Carbon Market and await the information on what types of credits will be assessed first.
Antti Vihavainen: For Puro it’s an opportunity for us to increase awareness among wider groups of climate professionals. Currently, carbon removal is still a niche and people may think that there is sort of moral hazards embedded in this market that carbon removal can be used instead of emission reductions.
However, I haven’t met a CFO yet, who would happily pay 100/ 200 euros for a ton of CO2 removed that they could instead reduce. Removals are so expensive. Usually, it makes sense to reduce emissions rather than remove them. I think the moral hazard issue is not convicting.
Educating people within the climate space about this logic and accepting removals just as part of the tool package is definitely among my personal goals. We aim to increase awareness also about the different methodologies and innovations that are taking place at the moment.
What about fossil fuel companies? Because I’m guessing they are the ones people in the climate space are most afraid of in terms of using carbon removals instead of emission reductions to keep their business?
I think there are certain fossil fuel companies that invest in this field and use carbon capture and storage as a way to keep on pumping out oil, whereas the rest, don’t bother doing that.
Solving the climate crisis is about demand. They are not going to end producing oil as long as there is demand for it. The only thing we can do is to curb the demand.
How does that happen? We need to bring better alternatives. And there are better alternatives. Once we have renewable energy in abundance, many industrial processes can be transferred into non-fossil fuel based operation.
We already know much of transportation can happen with batteries or potentially in the short term with hydrogen vehicles, for the heavy transport. Alternatives exist just everyone is waiting for them to scale up. It’s a chicken and egg problem and the government needs to play a part in growing the chicken.
Do you think the voluntary carbon market is moving successfully towards addressing previous issues with fake carbon offsets?
We need to be very proactive on that. At Puro.earth, we don’t use counterfactual baselines, which is a good start. There is a blog post that I wrote about that very topic. Meta standards, the likes of ICVCM will give guidance to us on what to require from our suppliers.
Unfortunately, the requirements they set for us are not on the level that would solve all the problems as of today. There might be people waving the flag of the CCPs compliance, that are not unproblematic with the current set of requirements. That is why it is really important for us to participate in the continuous improvement programs that VCM is running.
We are active to increase the requirements for what goes into the credit. Now there is a lot of requirements for the governance of how the credit is created, but not what it represents. Currently, what we want to emphasize is what a ton of carbon removal represents which is a ton of CO2 removed from the atmosphere permanently or near permanently.
At the moment, there is going to be all kinds of credits all kinds of value propositions or different kinds of processes in the CCPs approved principal.
Do you have a final message to the community working on addressing climate change?
As always there are companies that are on the fence and don’t know how they should go about the voluntary carbon market. For example, there are companies with 100% competence about the VCM, they go ahead and engage with different suppliers directly as they understand what is going on.
There are other companies with some competence in some areas, but not very much in other areas. They don’t need help from any other intermediaries, but they need to have a partner that covers, for example, certain portion of the process that could be just the transactional part covering the settlement. They may also require a partner that creates a portfolio on their behalf.
Then there are others that just want to hand out the money and outsource the whole process to another partner.
What we want to get out there is that all of these alternatives exist for companies with any levels of competence in the VCM. Depending on their understanding, they can choose to work with a transactional partner, or an advisory partner, or a purchase facility.
There isn’t a good excuse not to take part in the carbon removals market, because you can find the competence. You don’t have to have all of that inside. You can work with other organizations that provide that competence. It is likely to be more cost efficient to partner than to invest in your own competence in all of these areas.