Carbon Credits: High Integrity for Massive Decarbonization Financing

May 27, 2024

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Climate change
Grégoire Guirauden

Grégoire Guirauden

Chief Operations Officer

Carbon credits were launched in the 1990s under the Kyoto Protocol to enable the financing of the Clean Development Mechanism in what was called the “Global South.” This was the first global mechanism for financing large-scale transitions based on carbon impact performance. Thousands of projects were financed, most successfully, though a few encountered issues. Overall, there was a lot of learning.

In 2015, the Paris Agreement made the world realize it was time to switch gears to maintain a sustainable world. The carbon credit mechanism, where impact is rewarded with money to fund the most impactful projects, is playing a bigger role in supporting the transition.

With this new significant role for the carbon credit mechanism in financing decarbonization, extensive work has been done to provide all stakeholders with a robust framework for financing the transition.

We created Riverse at that moment to enable circular economy projects to get funding based on their impact, allowing them to scale. This article aims to explain how Riverse ensures the best quality for the credits we certify so that crucial funding can be secured.

It is no longer the time to blame the best carbon mechanism that exists because of previous learning mistakes. It is now time to massively finance decarbonization, notably through the carbon credit mechanism.

Carbon credit with integrity can enable greentechs development. Here a refurbishement facility.

Core Carbon Principles: Carbon Credit Only for the Most Useful Projects

In this section, we detail the criteria under which each project is assessed, using simple terms, to ensure the best integrity of the carbon credits we issue.

How to Assess Carbon Emissions Impact with Integrity

Robust Quantification of Emissions Reductions and Removals

Greenhouse gas (GHG) emission reductions are quantitatively, rigorously, and conservatively measured. Riverse develops its own comparative Life Cycle Assessment (LCA) data model and follows the ISO 14064-2:2019 standard to ensure we work at a project level with real data from the field.

All data models are built using the best databases, notably EcoInvent 3.10, and we add the most specific and precise data sources for every methodology. We develop all our methodologies with a working group consisting of project developers, researchers, and market experts, and submit each methodology to a public consultation to gather as much feedback as possible.

In terms of comparative life cycle analysis, we define a functional unit, system boundaries, a baseline, and a project scenario for each project. Last but not least, based on the precision of the best existing databases, we conduct an uncertainty assessment and define a buffer for each project to avoid any risk of over-crediting.

Reality with Effective Third-Party Verification

The project must be real. It must physically exist, and its impact must be verified annually by an independent accredited auditor to issue any credits.

Riverse Carbon Credits are all ex-post, meaning the mitigation activity has already taken place and has been verified. Offtake agreements can be implemented, but only verified Riverse Carbon Credits can be transferred and retired.

Project developers must report key information about their activities, with justifications, to prove that the estimated GHG emission reduction has occurred. This key information is reported through Key Impact Indicators (KIIs), which are defined for each methodology and project in the Monitoring Plan. KIIs are regularly monitored by project developers, reported on the Riverse certification platform (with proof), and verified by third-party Validators and Verification Bodies (VVBs) for every issuance of Riverse Carbon Credits (RCCs).

Additionality to Help Only Projects That Need Support

The Riverse Standard enables solutions that would not have occurred without revenue from carbon finance. This principle ensures that carbon financing spurs additional action to fight climate change, rather than subsidizing actions that would have happened anyway.

Riverse Carbon Credits (RCCs) cannot be issued for projects that would have occurred regardless of carbon finance. Several types of additionality tests are described below. To demonstrate additionality, all projects must apply:

  1. Regulatory Surplus Analysis: Mitigation activities must go beyond what is required by regulations to be eligible for RCCs.
  2. Plus one of the two below:some text
    • Investment Analysis: Project developers may use investment analysis to prove that revenue from carbon finance is necessary to make the project investment financially viable and attractive.
    • Barrier Analysis: Barriers may exist that prevent the mitigation activity from continuing or expanding. These may be financial, institutional, or technological barriers. Project developers must demonstrate how revenue from carbon finance is necessary to allow projects to overcome these barriers.

The Riverse Additionality Template enables Project Developers to demonstrate their additionality.

Permanence and Risk of Reversal

Permanent carbon removals ensure that carbon removal is maintained for the committed duration (at least 100 years for removal RCCs). This duration is the commitment period and represents the number of years for which the project developer can prove that carbon will likely remain sequestered.

Carbon removals are not permanent if the carbon is re-emitted (i.e., the removal is reversed) before the commitment period ends, for example, through natural disasters (fires, drought, pests) or project mismanagement.

Reversal risks are managed through: 

  • Contribution to the Provision Pool: Projects eligible for removal RCCs must contribute a default 3% of their verified removal RCCs to the provision pool. This covers a minimum inherent reversal risk of all removal RCCs. More details on the provision pool are available in the Riverse Procedures Manual.
  • Risk Assessment: Projects eligible for removal RCCs must evaluate the risk of reversal during the validation step using the Reversal Risk Evaluation section of Risk Assessment Templates. Details on how to fill in the template, and how to use the results, are in the Risk Assessment section below.
Carbon credit with integrity can enable greentechs development. Here a computer refurbishement facility.

Integrity Beyond Carbon: Supporting Sustainable Development

Co-Benefits Aligned with United Nations SDGs for Total Integrity

All projects must have a positive systemic impact by providing environmental and social benefits along with their climate benefits. The United Nations Sustainable Development Goals (UN SDGs) are used as a framework to measure co-benefits. All projects must support at least two UN SDGs with quantifiable KPIs that would not have occurred without the project.

As Riverse certifies projects in the circular economy, below is a list of sub-goals the projects we support also contribute to, all with quantifiable KPIs::

  • SDG 6 - Clean Water and Sanitation: 6.4 Increase water-use efficiency.
  • SDG 7 - Affordable and Clean Energy: 7.2 Increase substantially the share of renewable energy in the global energy mix.
  • SDG 8 - Decent Work and Economic Growth: 8.3 Support productive activities, decent job creation, entrepreneurship, creativity, and innovation, and encourage the formalization and growth of micro-, small-, and medium-sized enterprises.
  • SDG 8 - Decent Work and Economic Growth: 8.5 Achieve full and productive employment and decent work for all women and men, including young people and persons with disabilities.
  • SDG 9 - Industry, Innovation, and Infrastructure: 9.4 Upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean and environmentally sound technologies and industrial processes.
  • SDG 11 - Sustainable Cities and Communities: 11.6 Reduce the adverse per capita environmental impact of cities, including air quality and municipal and other waste management.
  • SDG 12 - Responsible Consumption and Production: 12.5 Reduce waste generation through prevention, reduction, recycling, and reuse.
  • SDG 14 - Life Below Water: 14.1 Prevent and significantly reduce marine pollution of all kinds, particularly from land-based activities, including marine debris and nutrient pollution.
  • SDG 15 - Life on Land: 15.1 Ensure the conservation, restoration, and sustainable use of terrestrial and inland freshwater ecosystems and their services.

Integrity in both ways: how to ensure environmental and social do not harm

Projects must not cause substantial environmental and social damage. These risks are managed through:

  • Stakeholder Consultation: Project developers must conduct a comprehensive and documented stakeholder consultation. Incorporating diverse perspectives and feedback is fundamental to the integrity of any project. This stakeholder feedback is collected online through the Riverse Registry for one month during the validation phase.
  • Risk Assessment: Project developers must evaluate the risk of environmental and social damage using Riverse Risk Assessment Templates.
  • Health & Safety of Workers: This is particularly important for Riverse projects, given the standard’s focus on industrial projects. Industrial environments may pose unique challenges and risks to workers, whose well-being and protection must be prioritized. Specific risks, such as exposure to harmful chemicals, are addressed in relevant methodologies. 

How to Avoid Leakage

Carbon leakage refers to the displacement of project activities from the project scope to areas outside the project scope, resulting in an indirect transfer of GHG emissions rather than the absolute avoidance or removal of emissions. Types of carbon leakage that must be considered for RCC issuance include:

  • Activity Shifting: Carbon-emitting activities are geographically displaced or relocated to areas outside the project boundaries as a direct result of the project's implementation. Risks and assessment methods of activity-shifting leakage are identified for each methodology.
  • Upstream and Downstream Emissions: Emissions are displaced to other locations or activities upstream or downstream in the supply chain or elsewhere within the project scope. The comprehensive life cycle assessment approach used for Riverse GHG reduction quantification considers upstream and downstream emissions as part of the project scope. Therefore, these emissions are included by default in the project’s GHG reduction quantification.

Other Procedures and Safeguards to Guarantee Integrity

No Double Counting: No Double Use, No Double Issuance, No Double Claiming

Riverse Carbon Credits (RCCs) shall be used, issued, and claimed only once.

  • Double Use of Credits within the Riverse Registry: RCCs are traced with a unique identification number from issuance to retirement (see more in the Riverse Procedures Manual, Chapter 9 RCC Management). An immutable certificate is generated upon retirement.
  • Double Issuance of Credits on Multiple Registries: It is not allowed to simultaneously issue carbon credits for the same mitigation activity, in the same crediting period, under both the Riverse Standard and a different standard.
  • Double Issuance of Credits along the Value Chain: Multiple actors along the supply chain are not allowed to issue multiple carbon credits for the same mitigation activity. RCCs are issued to projects that are fundamental in the value chain and are fully allocated to the project.
  • Double Claiming: RCCs shall not be claimed by both the entity retiring the carbon credit for the purpose of making a GHG emission offsetting claim and:some text
    • Nationally determined contributions (NDCs)
    • National climate policies and emissions trading schemes
    • Other GHG-related environmental credits

For double claiming between entities retiring carbon credits and the end-users of products that have been issued carbon credits, guidance from reporting schemes, the GHG Protocol, and other accounting mechanisms shall be followed.

Ensure the Substitution is Real

The products or services generated as project outputs must appropriately, realistically, and efficiently substitute those of the baseline scenario. This ensures that projects truly replace pre-existing products or services and minimize the risk of creating new demand. It also improves the accuracy of GHG reduction quantification by ensuring that an appropriate baseline is considered. Therefore, each project must prove that their project outputs have similar performance metrics to the baseline scenario and deliver equivalent functions.

Minimum TRL to Support Only Impactful Projects in the Short Term

Technology Readiness Levels (TRLs) are a method for understanding the maturity of a technology. TRLs provide a consistent reference for understanding technology evolution, regardless of technical background. Each project must be at least TRL 6 to ensure Riverse Carbon Credits only finance projects with strong and imminent future decarbonization potential.

Validate European Target Alignments

This criterion ensures that Riverse Carbon Credits fund technologies that will remain viable and low-impact in the near future. Riverse does not issue RCCs for projects with only minor improvements over the baseline scenario. Avoided emissions must be aligned with the European Union’s target emission reductions for the project’s sector from 2020 to 2030.

Ensure a Minimum Impact

The project must justify a minimum emission reduction of 1,000 tCO2eq over the crediting period of the project. This criterion ensures that we avoid supporting too small projects and that the amount of work is counterbalanced by concrete financing support.

Monitoring, Verification, and Safeguards to Guarantee Upstanding Carbon Credits

Annual Monitoring Based on Real Data

How Monitoring Happens

As Riverse works with industrial projects, the impact monitoring can be done annually, based on real, auditable, industrial data. This monitoring and verification process is conducted in four steps:

  1. Key Impact Indicators (KII) are measured by the Project Developer and uploaded to the Impact Certification Platform at least once per year with the relevant proofs.
  2. KIIs and their sources are reported in the Monitoring Report, which is audited by an accredited Validation and Verification Body (VVB).
  3. Credits are issued ex-post, with the status “verified” on the Riverse Registry, according to the actual project outcomes.
  4. RCCs are listed on the Riverse Registry and can be transacted or retired.

Who Can Conduct These Verifications?

Riverse has developed precise requirements for Validation and Verification Bodies. All auditors must comply with these VVB guidelines to be accredited under the Riverse Standard. The accreditation criteria for VVBs are as follows:

  • VVBs shall have valid accreditation from ISO 14065, COFRAC ISO:17029, or equivalent, or approval as a Designated Operational Entity (DOE) under UNFCCC-CDM, with scopes: 1, 4, 5, 6, or 13.
  • The VVB company shall prove more than 5 years of auditing experience, including at least 2 years in environmental/sustainability auditing.
  • VVBs shall adhere to the Riverse Conflict of Interest Policy and submit a declaration of conflict of interest form for each validation or verification process they perform.
  • VVB accreditations are reviewed annually, and they must prove that the company is financially sound, disclose to the Riverse program any negative media coverage, and disclose any legal/juridical proceedings.
  • Finally, VVBs are only accredited in their sectors of expertise, based on the Riverse methodology field.
carbon-credits-integrity-recycling

Other Standard Safeguards to Ensure Carbon Credit Integrity

Clear Governance and Independence from the Market

The Riverse Standard's governance architecture is designed to ensure scientific rigor, independence, and efficiency. It is spearheaded by two principal independent entities:

  • The Standard Advisory Board: Ensures Riverse’s activities are continuously in line with its foundational mission, provides strategic direction, endorses or vetoes amendments to the standard rules and methodologies, and recommends enhancements.
  • The Technical Advisory Committee: Composed of independent experts, provides technical expertise and reviews on specific methodological aspects or project certifications.

In addition to these independent governance entities, four specialized Riverse teams are dedicated to the standard's operational execution:

  • Executive Team: Manages the organization's day-to-day operations.
  • Secretariat: Compiles and synthesizes feedback and updates on standard documents, and conveys these to the Standard Advisory Board for deliberation and approval.
  • Certification Team: The primary point of contact for Project Developers navigating the standard processes, provides technical assistance, process guidance, feedback, and performs the final validation review.
  • Climate Team: Oversees the scientific approach and choices behind Riverse Standard Rules and methodologies. As GHG quantification and climate solution experts, they assist the Certification team in case of technical inquiries.

Strict Conflict of Interest Monitoring

Riverse implements a robust Conflict of Interest Policy that outlines how the organization identifies, manages, prevents, and discloses potential or real conflicts of interest to comply with applicable regulatory requirements and codes of practice. The following stakeholders must sign the policy:

  • Members of the Executive Board
  • Members of the Secretariat and Standard Advisory Board
  • Members of the Climate, Certification, R&D, and Partnerships teams
  • Members of the Technical Advisory Board
  • VVBs
  • Contractors to the Riverse Standard involved in at least one of the procedures described in the Riverse Procedures Manual.

Authentic Humbleness and Transparency

Transparency is key. All Riverse documents are available online, and all documents are frequently open to public consultation to receive feedback and continuously improve our work. Feel free to reach out to contact@riverse.io if you have any requests.

Controlling Entities to Ensure Carbon Credit Rules Are Respected

Entities Controlling Carbon Credit Issuance Integrity

ICROA - The International Carbon Reduction and Offset Alliance

For over a decade, ICROA, operating under IETA, has shaped the voluntary carbon market, ensuring quality and best practices in emissions reduction. In 2024, its strong reputation attracted over 20 new programs. ICROA’s endorsement procedure, carried out by independent assessors, evaluates standards and registries for aspects such as governance, validation processes, and environmental impacts, maintaining high standards of quality and impact. In response to credibility challenges, ICROA introduced a new endorsement procedure in late 2023.

CORSIA - The Carbon Offsetting and Reduction Scheme for International Aviation

CORSIA, a global initiative by ICAO, mandates aircraft operators with emissions over 10,000 tonnes of CO2 to monitor and offset emissions exceeding 2019 levels. This scheme sets specific offsetting requirements and ensures the integrity of carbon offset programs through the Technical Advisory Body (TAB). Entering a more rigorous phase from 2024 to 2026, CORSIA’s first operational phase began on January 1, 2024, significantly impacting the VCM.

ICVCM - The Integrity Council for the Voluntary Carbon Market

IC-VCM is enhancing the carbon credit market by setting high-quality standards through Core Carbon Principles (CCPs). It collaborates with industry stakeholders to define criteria for high-quality carbon credits and oversees their implementation. Recently, IC-VCM began evaluating over 100 active carbon credit methodologies for compliance with CCP standards, with initial decisions expected by March.

Carbon credit with integrity can enable greentechs development. Here a low-carbon storage facility.

Entities Controlling Carbon Credit Usage Integrity

IETA - The International Emissions Trading Association

IETA promotes market-based climate solutions. Its Guidelines for High-Integrity Use of Carbon Credits ensure alignment with the Paris Agreement, accurate emission quantification, a net-zero pathway, and transparent reporting. It prioritizes high-quality credits certified by reputable standards.

SBTi - The Science Based Targets initiative (SBTi)

SBTi helps companies set science-based emission reduction targets. Companies can purchase carbon credits for Scope 3 emissions and beyond value chain mitigation, demonstrating climate leadership. For net zero claims, removal credits must be permanent and verifiable.

VCMi - VCM Integrity Initiative

VCMI focuses on the demand side of the VCM, introducing the Claims Code of Practice for responsible carbon credit usage. It also launched the VCM Access Strategy Toolkit to help countries engage with VCMs while supporting national climate objectives. VCMI’s new "Scope 3 Flexibility" claim, to be finalized in late 2024, will allow companies to offset up to half of their Scope 3 emissions using carbon credits, aiming to reduce carbon credit reliance to zero by 2035.

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