Where To Buy Carbon Credits?

Key Insights:

• It is the responsibility of both corporate buyers and project owners to understand the different methods of buying and selling carbon credits in the Voluntary Carbon Market.

• Transparency, quality, and impact must be considered higher priorities than just purchasing and selling quickly via a broker.

• Marketplaces can offer better data, quality, and transparency when it comes to buying carbon credits

The growth of buying carbon credits to compensate for residual emissions has naturally led to the development of multiple ways and methods of purchasing. A key question many conscious companies looking to compensate for their residual emissions are asking themselves is: ‘where should we buy carbon credits?’ In this article, we answer that question with a comparative look at the two main methods: brokers and marketplaces.

As the last COP summit in November 2022 in Egypt highlighted, there is a drastic need for private sector involvement to help tackle the climate, biodiversity, and social crises we collectively face.

To date more than 4,000 companies have made climate pledges and signed up to the Science Based Targets Initiative (SBTi), a partnership that drives climate action in the private sector by enabling the setting of science-based emissions reductions targets.

In 2022, the primary market for carbon credits is expected to hit $1.2 billion (Trove), and this number is forecast to hit $40 billion by 2040. While this is promising, it remains true that the Volunatry Carbon Market (VCM) lacks standardization as well as transparency and requires further development.

Brokers vs. Marketplaces

For many years the VCM has been dominated by brokers facilitating carbon credit deals between corporates and carbon projects. Some brokers do play an important role in the market, helping to connect buyers with sellers, and getting projects off the ground by offering financing and expertise.

However, brokers have faced significant criticism in the past. Mostly, this is related to non-transparent pricing, a lack of standardization, limited focus on project quality, misrepresented impacts, and purchasing processes.

With the market growing rapidly there is now an emergence of different methods to purchase carbon credits for company buyers. The VCM now plays host to a wide array of players including traditional brokers, retailers, traders, and project owners offering deals via marketplaces.

The Options

Broker: Typically, brokers will purchase a large volume of credits directly from project owners and then sell these with a mark-up to interested companies. They may work with a variety of clients, including companies, governments, and individuals, and may be involved in the trading of both voluntary and compliance-based carbon credits. Many brokers are offering consulting services for companies to measure emissions, set targets, and implement reduction measures.

Marketplace: A carbon credit marketplace provides a digital infrastructure for project owners to sell their carbon credits directly to corporate buyers. Typically, this will include standardized contracts and transparent pricing. The latter will ensure the full price of the carbon credit goes directly to the project owner.

Retailer: Similarly, to carbon credit brokers, retailers purchase credits in a large volume. However, compared to brokers they offer the acquired credits online with a mark-up in place.

Project Owner: In some instances, project owners are selling their carbon credits directly to corporate buyers in an OTC deal structure, however typically only to big buyers interested in large volumes. This is the most direct way to purchase credits but relies upon the buyer conducting deep research and understanding how best to identify quality projects.

How Should You Buy Carbon Credits?

In this article we analyze and compare two main methods of purchasing carbon credits: brokers and marketplaces. To do this we have reviewed both methods on four different criteria: pricing; quality assessment; project selection and finally, the purchasing process.

Carbon Credit Pricing

For the VCM to succeed in contributing to decarbonization efforts, transparency is crucial. This is particularly relevant when it comes to the prices offered for carbon credits, and this is an area of contention when it comes to brokers.

Brokers can dictate the price of the carbon credits they sell with no transparency on the margin included. Corporate buyers only see one final price.

As uncovered by the Financial Times, this margin can sometimes be up to twice or three times more than the original price the credits were sold for. In one example, carbon credits generated by Worldview International Foundation (WIF) were sold at $30 per ton, almost triple the price they were originally sold for to the broker.

High-quality projects selling carbon credits can deliver climate benefits, biodiversity benefits, plus community and economic benefits. However, with brokers not disclosing pricing structures or details on the projects, there are real questions about how much of the money paid by companies reaches projects and thus how much impact is made.

This is what marketplaces or platforms such as goodcarbon seek to avoid and eliminate by offering a transparent means of buying and selling carbon credits. The price of credits offered is defined by the project owner alone and displayed accordingly to interested company buyers on a digital marketplace.

A flat or percentage fee is charged for any transaction on the marketplace, but this is paid for by the buyer, thus ensuring the full amount of the carbon credit fee goes directly to the project owner. This ensures every purchase of carbon credits is traceable, transparent, and that real impact is made.

Quality Assessment

Global demand for carbon credits outstrips quality supply. There is a real need both for companies to reduce their emissions and for a ramp up of quality projects to assist with the compensation for unavoidable emissions. Ultimately, it is paramount for companies to know the projects they are investing into can prove their carbon credits are verified by a third-party according to a recognized standard, e.g. – Verra. Equally, it’s also important the projects are permanent and additional among many other quality criteria. Without meeting these criteria, companies who invest into such projects risk being accused of greenwashing and damaging environmental integrity.

Brokers in the VCM typically look to trade large volumes of carbon credits. Frequently, quality is deemed less important to securing a large volume and offering attractive prices. This coupled with the shortage of quality credits on the developing market leads to quick deals that can offer limited impact.

In contrast to brokers, marketplaces often offer more transparency on the project’s quality, for example through more stringent quality assessment processes. The quality of such assessments can vary, and the depth is often reflected in the transaction fee that is charged.

Many marketplaces are also integrating third-party project rating services such as Sylvera and BeZero. These carbon intelligence platforms apply data and machine learning technology to provide quality assessments of projects to interested buyers.

At goodcarbon, we have developed a quality assessment that enables the comparison of projects across three dimensions: impact, risk (including permanence), and integrity. This framework evaluates five impact dimensions: climate change mitigation; biodiversity enhancement; benefits for local communities; climate change adaptation, and pollution reduction and resource management. By utilizing this framework alongside existing external verification standards, such as the Verified Carbon Standard (VCS), we choose project partners that can deliver the most trustworthy and genuine impact.

Project Selection

Like many markets providing a choice of investment opportunities is appealing when it comes to investing into carbon projects. Buyers are motivated by a mix of different reasons for purchasing carbon credits. These range from the need to offset residual emissions, to meeting regulatory requirements, to demonstrating to consumers and stakeholders their commitment to compensating the environmental impact of their operations.

Therefore, it can prove beneficial for a company to have the option of purchasing credits from multiple sources and being able to build a portfolio across multiple asset classes, geographies, and maturities. Marketplaces offer companies the possibility to see the selection of projects available including volume and prices and to choose their preferred project based on the transparent information provided.

This contrasts with brokers, who will typically offer simple back-to-back trading of projects. This means there is often limited choice and typically limited information on the projects available to interested buyers.

Purchasing Process

The VCM is often criticized for its lack of transparency and standardization and the nature of the deals struck by brokers feeds into this. Typically, the transactions conducted by brokers are OTC via email or phone. This lack of standardization means there is a distinct lack of transparency in the deals conducted.

Furthermore, using a middleman service means there is no direct contact between project owners selling carbon credits and the companies buying. As previously explained, this enables increased margins to be added on by brokers and means quick deals are favored over the true quality and impact of projects being offered.

Unlike brokers, marketplaces offer a far more transparent means of purchasing. In goodcarbon’s instance, we offer a convenient, compliant, and digital purchasing process. Project owners and companies can both sign up to our platform and be in direct contact with one another. With every purchase a standardized contract is digitally closed between buyer and project owner. By offering standardized contracts on every purchase, we allow for the high tradability of credits and ensuring the process is fully transparent.

Buy and Sell Carbon Credits Wisely

The Voluntary Carbon Market is estimated to be capable of delivering 40% of decarbonization needs by 2030 , plus a range of additional biodiversity and social benefits. Therefore, it must be stressed that selling and buying carbon credits should always be done with a quality first mindset. Failure to do so only results in low-quality credits entering the market with limited impact, companies unwittingly greenwashing, and ultimately, more damage to environmental integrity. This is not an option.

It is on every market player – projects, companies, and intermediaries – to raise their standards to ensure carbon credit selling and buying really makes the impact it claims to. This means project owners have the responsibility to not sell to the first broker, who will offer a quick sale of 80% of their credits, in exchange for an easy fee.

Instead, they should seek to explore all the options available to them in the VCM and understand the benefits on offer to the project, their community, and the planet by doing so. By taking the time to analyze such options they can ensure impact is reached with the credits they are selling.

The same applies to companies looking to purchase carbon credits. The specter of greenwashing always lingers when it comes to such transactions. Thus, companies equally should be motivated not just by a positive PR story but understanding that their investments need to truly have a lasting impact on the climate, biodiversity, and communities.

This means companies need to ensure the projects they support are high-impact, low-risk, and high-integrity. Additionally, companies should be looking to buy carbon credits via a transparent process with standardized contracts and transparent pricing that ensures due diligence has taken place.

Only with this careful analysis and consideration from both parties can we ensure that buying and selling carbon credits can live up to its potential and deliver real climate, biodiversity, and community impact.

Back in Tac and glad to be back

Reflecting on a trip back to a country that changed my life - the Philippines - and the organization that made it possible.

I left Project Leyte in October 2015 after almost a year both volunteering and working for All Hands Volunteers. It was my first project, and typically – like so many others – my initial prediction of staying a couple months was immediately dumped in favour of extending… and extending some more.

Without sounding too melodramatic that first project truly did alter the course of my life and I just knew I had to go back one day. That time came last week when my girlfriend, Evelyn (who I met on project) and I returned to Tacloban.

We stayed, of course, at Yellow Doors Hostel where Jacques and Trixie, who ran the hostel and the infamous Mobile Bar welcomed us ‘home’. It was fantastic to catch up with this wonderful pair, who helped AHV in so many varying ways during the project’s time.

Revisiting each project and walking the streets of Tacloban brought back a flood of happy memories. It was truly special to wander back into 83-C where we built 42 permanent homes and see each one still standing strong with many, many happy homeowners.

At the likes of the Inte family’s house we were warmly welcomed in and promptly fed dried fish and rice, while when we visited the Macatalad household we were amazed to see the extension they had built. Nancy greeted us with astonishment and gifted us two small homemade purses. Their generous nature had not changed during our absence.

There was further emotion when we visited the home of the elderly Hilario Espino and his wife. He continued to stun us with his amazing English and further tug at our heartstrings when he pulled out his All Hands book on how to care for the house and a list of names of all those who worked there. He reflected to us how without the organization he and his family would not even be here today.

There were a lot of visits we felt compelled to make while in Tacloban and one was of course back to our old base in Utap. Guided by the legendary beer ladies Gina and Ofelia we wandered round the old rooms and corridors reminiscing and laughing together. It seems the building will now become a hostel. All Hands reunion and takeover anyone?

We also drove through Magallanes to visit the Barangay Improvement Program projects. I squeezed in a terrible 3-pointer attempt on the still beautiful basketball court, while the rainbow barangay hall greeted us on our first visit - what a breath-taking sight. Still in good condition stood the chapel and both day care centres, but sadly the playground was overgrown and no longer in use.

Everywhere we went people would happily greet us and recognize my All Hands Project Leyte t-shirt with gratitude. It was clear the organization has left a happy and positive footprint throughout Tacloban.

Leaving Magallanes we headed for Santo Nino where we had previously built transitional homes and a transitional kindergarten. It was also where many of our old local staff lived such as the laundry ladies – Delia and Eufemia – and our driver – Allan. All three were stunned to see us there with Delia’s reaction best as she shouted out our names and ran down the street to us.

Interestingly both projects here met different ends. The transitional homes are no longer in use with everyone having moved into permanent homes. A positive conclusion for residents but it seems sad that these adequate

homes, though they would now need some sprucing up, are not being used at all. The kindergarten is still in use, though it is now cramped in next to the concrete buildings of the school.

Another visit was across the San Juanico Bridge to Calampong in Samar where All Hands responded to Typhoon Ruby and began building boats for this cut off community. Picked up by Rosalie and her beautiful family on their All Hands boat was a fitting moment. Much like Tacloban, wandering round here brought back so many memories as we visited our old base, the boatyard, and saw so many of the beneficiaries. Fortunately, we can report back that practically all the boats built and repaired by AHV are still in use with many delighted owners using them. We were even greeted by one, who ran up to us in the street to thank us for our efforts and for coming back to see them.

Unfortunately, the legendary Jindra who worked so hard on our boat building projects and the evacuation center in Hernani was not there at this time.

However, we were able to meet her back in Tacloban for breakfast and a good catch up. She still retained that winning sense of humor and it was amazing to see her again.

While our journey here was exciting and every reunion was special, there remained a tinge of sadness spliced throughout each visit. Practically every family or local staff member we visited had nothing but positive words for us and messages of gratitude, but each admitted openly that their financial troubles continue.

This wasn’t intended for pity but simply honesty with friends and I must admit it was difficult to accept. All Hands Volunteers has provided refuge, hope, homes, boats and so much, but still the hardships in many ways do continue. This is not a criticism of our wonderful organization but simply a recognition that for our beneficiaries and old staff that their lives remain a battle and that they have seen and witnessed things we can barely begin to imagine.

I am reminded of something my own father wrote about me to All Hands Volunteers in that every parent wishes in many ways for them to be better than themselves. And this too is particularly evident in all the communities we worked in. Understandably, their hope is that their children can make something of themselves to ease their financial concerns and better the world.

Leaving Tacloban again was a hard moment, but I know that so long as I visit the Philippines I will continue to go back there, simply to share in those smiles, listen to people’s stories, reminisce on what was a life changing place for me and show each person there that they have had just as big an impact on us volunteers as we had on them.

Sweeping Away The Dirt To Build Something Beautiful

Proud, gracious and giving are all words commonly associated with Filipino people and Cordencia M. Tado embodies that. The 74-year-old does not let age stand in her way as she strives to make her community in Magallanes, Tacloban better alongside All Hands Volunteers every day.

Mrs Tado, a resident of Barangay (Filipino terminology for a village) 58, where the Project Leyte team recently completed building a chapel, gave up her time each morning and afternoon six days a week to sweep and tidy the work site for the volunteers and carpenters.

It is her heartfelt way of showing appreciation for the ongoing work of All Hands Volunteers to help rebuild communities almost two years on from Typhoon Haiyan.

“I’m very lucky to have All Hands Volunteers here,” Mrs Tado said.

“It was my job before, I was a cleaning woman. I was a barangay cleaner for 20 years. But now I will happily do it voluntarily. If I was younger I would definitely volunteer with All Hands because I really want to.”

The Barangay Improvements Program, which Mrs Tado has become so attached to, is targeted in Magallanes, a coastal area of Tacloban that was wiped out by Typhoon Haiyan, and places a key emphasis on restoring people’s pride in their communities.

The team organizes clean-up drives in the communities they are helping. This counts as the first stage of each build, before the team then meets with people in the community to identify what they would like to see built. Once it is designed and agreed upon plans are put into action.

With a basketball court, playground, learning center and covered pathway already complete, the chapel is the fifth of eight sites to now finish and Mrs Tado quickly became a known face to all the volunteers and carpenters on site.

“When I wasn’t cleaning, I always stopped by to talk to the volunteers, to check on them, praise them and appreciate them,” she added.

“The residents here see the chapel is really beautiful and know they now have a place to do their mass and other prayer meetings. The barangay has always been very religious. This chapel gets renovated slowly every year by a sponsor family. They fix a part of the chapel bit by bit. But this is a big improvement. It’s perfect beauty.”

It is clear to see Mrs Toda and All Hands Volunteers share the same ethos in helping communities even if it can be portrayed as being on a smaller scale. For the 74-year-old, who moved to Barangay 58 from Manila with her husband in 1973, the involvement of the NGO has already helped to transform attitudes in the community.

“There’s a big difference in the community since I moved here. People didn’t care about each other before,” she added. “Now, especially in the presence of All Hands Volunteers, people have started caring again and also praising the job being done.”