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Introducing a new tool for monitoring, reporting and verifying CO2 removals

Today marks the launch of a new interactive visualisation of the landscape for monitoring, reporting and verification of carbon dioxide removal methods, a joint project between the Grantham Research Institute and AlliedOffsets. Josh Burke, our Senior Visiting Fellow and Leo Mercer and Anton Root describe the purpose and benefits of the tool for policy practitioners, CDR developers and purchasers – who can use it to understand the market at a glance.

Why is monitoring, reporting and verification of CO2 removal so important?

Alongside actions to rapidly reduce greenhouse gas emissions, carbon dioxide will need to be removed from the atmosphere if the world is to meet the Paris Agreement climate goals. The Intergovernmental Panel on Climate Change (IPCC) suggests carbon dioxide removal will need to be scaled up from a current base of around 2 Gt (billion tonnes) CO₂ removed per annum to at least 10 Gt by 2030 and 100-1,000 Gt over the remainder of the century to counterbalance residual emissions.

The proliferation of net zero targets, and by extension the use – or planned use – of carbon dioxide removal (CDR) has led to increased attention on the governance of CDR. A key component of this governance architecture is monitoring, reporting and verification (MRV), which is the multi-step process to measure the amount of greenhouse gases removed by a specific removal project and reported to an accredited third party.

Robust MRV can help governments and private sector actors overcome information gaps and asymmetries that may make it difficult for them to make investment or regulatory decisions. This is critical as the current crisis of confidence in the voluntary carbon market (VCM) has the potential to erode trust and confidence in CDR, halt capital investments and slow the integration of CDR into climate policy. Successful industries rely on standards and certification to ensure activities meet expectations. The CDR industry is no different.

Furthermore, owing to the absence of internationally agreed minimum quality standards, multiple regulatory efforts (such as the EU Carbon Removals and Carbon Farming/CRCF Regulation) are developing in parallel to fast-moving technical developments in the VCM. This results in overlapping protocols for some CDR methods and incomplete MRV coverage for others. Consequently, the MRV landscape has become ever more confusing. This makes comparison and oversight of CDR difficult for investors and governments alike. Greater transparency is sorely needed.

From mapping the MRV ecosystem to launching a new interactive tool

With new protocols constantly emerging, the challenge for policymakers, researchers and investors is to maintain a systematic overview of activity and use this to improve policy. To shed light on this, as a first step in 2023 the Grantham Research Institute conducted an MRV ecosystem mapping exercise to help identify the number of, and interrelationships between, regulations, certifying entities and MRV protocols across the spectrum of CDR methods.

To qualify for inclusion, protocols had to provide guidance for CDR activities that lead to net CO2 removals from the atmosphere and carbon capture and storage (CCS). Protocols on the latter were included because CCS facilitates certain CDR methods like direct air carbon capture and storage (DACCS) and bioenergy with carbon capture and storage (BECCS).

In partnership with AlliedOffsets, we are launching today the next iteration of this work: Transparent Reporting and Certification for CDR or the TRACEcdr tool. This has digitalised our original research to create a new interactive tool for policy practitioners, CDR developers and purchasers. TRACEcdr combines the mapping efforts of the Grantham Research Institute with AlliedOffsets’ data-gathering on activity happening in the VCM.

What does the tool do?

The TRACEcdr tool responds to the challenges set out above by creating the first interactive digital tool to provide transparency and oversight to the CDR market. It involves three initial steps, two of which we can present today in the beta version.

  • The first systematically maps and digitalises the MRV ecosystem for all CDR methods, providing an interactive digital MRV ecosystem.
  • The second step illustrates the activity within the system by providing information on the number of projects and the volume of issued credits for each CDR method and MRV protocol. Data is provided on project registrations and issuances of credits from the AlliedOffsets database of over 32,000 projects globally, from 25 registries plus hundreds of unregistered projects.
  • The third step, due for completion in 2025, will overlay the results of a systematic evaluation of MRV quality by assigning scores to the MRV protocols that underpin credit issuance.

The outcome is an interactive visualisation of the CDR MRV landscape. The tool has been created with an eye towards understanding the market at a glance, allowing policymakers and investors to grasp the complexity and activity within the ecosystem such as risks and benefits of current market activity, where activity is happening, by what methods and eventually, how rigorous and credible underlying MRV protocols are.

How to interact with TRACEcdr

Upon opening the TRACEcdr tool, four levels of the MRV system are visible:

  • Level 1 is organised according to CDR method.
  • Level 2 is the entity that provides the removal standard for a given CDR method.
  • Level 3 details the MRV protocol and denotes whether a protocol is applicable in a national or international context and for voluntary or compliance purposes.
  • Level 4 visualises credit issuance projects per protocol. The larger the node, the larger the credit issuance. Clicking on nodes in the fourth tier enables the user to isolate and trace the connected nodes in each tier below.

Users of the tool can filter for different options such as whether the protocol is nationally or internationally focussed and whether it is for use in compliance or voluntary carbon markets. CDR methods or protocols can be isolated such that all activity can be seen more easily. Some protocols do not connect to the fourth tier of the ecosystem map either because they do not have any registered projects associated with them, or because AlliedOffsets has been unable to access data on those protocols at the time of publication (this is mainly for compliance issuance due to data protection regulations).

Key insights

A major trend exemplified by the tool is the dominance of ‘land-based biological’ methods. Although methods like DACCS have dominated CDR discussion and funding, the overwhelming activity within removals today – by the sum of MRV protocols, project number and credit issuance – are projects planting trees or restoring natural carbon sinks like peatlands and soils. Indeed, of the 117 MRV protocols that have been recorded in total (between 2005 and mid-October 2024), 29% are attributable to afforestation, reforestation and forest management (A/R), 18% to soil carbon sequestration (SCS), 9% to peatland and wetland restoration and a further 5% to BECCS. In terms of credit issuance, A/R accounts for 77% of all issued credits, with peatland restoration projects constituting another 19%.

The ecosystem is currently in a rapid state of development. In 2023, 22 MRV protocols were published, which was a small increase on the total of 19 in 2022. Protocol development in 2023 skewed towards biological methods with seven protocols, and SCS with three. Data from 2024 indicate more balanced MRV development, with 15 protocols to date including two for ocean alkalinity enhancement, two for biomass carbon removal and storage (BiCRS) and two for CCS but also including single protocols for enhanced rock weathering, direct ocean capture and DACCS. 2024 may yet surpass 2023 in terms of the total number of MRV protocols published.

Although we observe a complex system with duplication and year-on-year increases in MRV protocol development, the majority of issuance is occurring through a few select protocols. For example, for peatland and coastal wetland restoration, Verra’s VM0033 protocol is responsible for 99% of issuance. For soil carbon sequestration, four protocols account for 97% of all issued credits, with Verra’s VM0032 and VM0026 respectively accounting for 31% and 30% of total issuance. For A/R, 90% of issued credits stem from just four protocols, with the California Air Resources Board’s Compliance Offset Protocol U.S. Forest Projects (compliance) issuing 64% of all credits (114 million).

This coalescence in the market has benefits and risks. On the one hand, it suggests that improvements to the dominant protocols could ripple through most of the system. On the other, it may indicate systemic risks if in the future new evidence indicates problems with these dominant protocols. For this reason, it is important that there are independent assessments of the quality and rigour of MRV underpinning CDR issuance.

Table 1. Overview of system activity

The numbers in brackets for the CDR method column indicate the total number of protocols per method, but we only illustrate the most popular

CDR method Registry Protocols with greatest issuance No. of projects No. of issued or sold credits % of total
Afforestation, reforestation, agroforestry, forest management (34) American Carbon Registry Compliance Offset Protocol U.S. Forest Projects 113 114,065,156 64%
Improved Forest Management (IFM) on Non-Federal U.S. Forestlands 150 26,243,535 15%
Gold Standard Impact Registry Afforestation/ Reforestation (A/R) GHG Emissions Reduction and Sequestration Methodology 62 11,389,778 6%
Woodland Carbon Code WCC Standard v2.2 2,118 8,955,223 5%
Soil carbon sequestration in croplands and grasslands (21) Verra VM0032 Methodology for the Adoption of Sustainable Grasslands Through Adjustment of Fire and Grazing v1.0 11 6,098,086 31%
VM0026 Methodology for Sustainable Grassland Management v1.0 48 5,786,488 30%
Plan Vivo PU001 Estimation of Baseline and Project GHG Removals by Carbon Pools in Plan Vivo Projects 10 5,209,137 27%
BioCarbon BCR0001 Quantification of GHG Emission Reductions from GHG removal activities 20 1,863,323 10%
Peatland and coastal wetland restoration (10) Verra VM0033 Methodology for Tidal Wetland and Seagrass Restoration, v2.0 30 4,802,658 78%
Peatland Code Peatland Code v1.2 295 1,268,675 21%
American Carbon Registry Restoration of California Deltaic and Coastal Wetlands 1.1 2 52,405 1%
Verra VM0036 Methodology for Rewetting Drained Temperate Peatlands v1.014 2 0 0%
Biochar (5) Puro.earth Puro.earth Biochar Methodology Version 2.4.1 44 295,827 100%
Verra VM0044 Methodology for Biochar Utilisation in soil and non-soil applications v4.0 8 0 0%
DACCS (2) Climeworks Carbon Dioxide Removal by Direct Air Capture 10 175,836 100%
BECCS (6) Puro.earth Geologically Stored Carbon Methodology v2.2 1 157,592 100%
Bio-oil storage (2) Charm Industrial Bio-oil Sequestration Prototype Protocol for Measurement, Reporting, & Verification 1 154,063 99.997%
Isometric Bio-oil Geological Storage 1 5 0.003%
Direct ocean carbon capture and storage (2) Equatic Methodology for Measurement, Reporting, and Verification of Electrolytic Oceanic Carbon Dioxide Removal 4 63,221 99.2%
Captura Carbon Dioxide Removal Pathway: Ocean Health and MRV 2 508 0.8%
Biomass sinking (1) Running Tide Framework Protocol for Multipathway Biological And Chemical Carbon Removal in the Ocean 2 18,398 100%
Enhanced rock weathering (5) Puro.earth Enhanced Rock Weathering in Soil Methodology 1 12,276 100%
Carbfix Permanent and Secure Geological Storage of CO2 By In-Situ Carbon Mineralization 8 0 0%
Ocean alkalinity enhancement (4) Planetary Ocean Alkalinity Enhancement MRV Protocol 0 8,684 97%
Ebb Carbon Measurement, Reporting and Verification for Safe and Effective Carbon Dioxide Removal 1 256 3%
BiCRS (2) Isometric Biomass Geological Storage 1 4,403 100%
Geological storage (1) Puro.earth Geologically Stored Carbon Methodology v2.2 1 587 100%
Mineral products (2) Gold Standard Impact Registry Carbon Sequestration Through Accelerated Carbonation of Concrete Aggregate 15 149 100%
Marine biomass sinking (1) Rewind Marine Terrestrial Biomass Storage 3 0 0%
CO2 capture, transport and storage (9) Australian Carbon Credit Units Carbon Credits (Carbon Farming Initiative—Carbon Capture and Storage) Methodology Determination 2021 1 0 0%

 

One more surprising insight, given that MRV development for CDR methods is primarily happening in the VCM, is the major role of compliance markets. Just under 60% of credits issued can be used in compliance markets, most significantly within California’s Air Resources Board programme. However, outside of California and in terms of novel durable CDR, there is no virtually issuance in compliance markets yet.

Note that the data are derived only from those projects that are registered on a registry adhering to a protocol included in our analysis. Many novel companies and projects are in the pilot phase, meaning they are not adhering to any protocol when selling credits. This carries risk for buyers, but it also allows the suppliers to launch and sell credits quickly, without needing to develop a protocol and certify against it, a process that can take years. We can expect this to continue over the next decade, as pilot projects begin to issue credits and more projects come online.

Future plans for TRACEcdr

The release of the beta version of the TRACEcdr tool today is an early step in promoting openness and transparency in CDR markets. We are using this release to product-test and gain insights and feedback from user experience. The data will be updated on a regular basis. Further iterations will include more visualisations, and more data added for each of the protocols and a second release in the second quarter of 2025.

Access the TRACEcdr tool at https://www.lse.ac.uk/granthaminstitute/tracecdr/. We welcome user feedback – please send to l.w.mercer@lse.ac.uk / j.burke2@lse.ac.uk.

Josh Burke is a Senior Visiting Fellow at the Institute for Responsible Carbon Removal and a Senior Policy Fellow at the Grantham Research Institute; Leo Mercer is a Policy Analyst at the Grantham Research Institute; Anton Root is the Co-Founder of AlliedOffsets. The opinions expressed in this writing are the authors’ own and do not reflect the position of any employer.

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The Price is… Wrong? – Climagination with Jason Grillo

Carbon removal prices are going to reflect value to the customer rather than cost of production. Here’s how.

Photo by Eva Bronzini: https://www.pexels.com/photo/blank-tags-in-close-up-photography-8058803/

 

“The purpose of a business is to create a customer … The customer never buys a product. By definition the customer buys the satisfaction of a want. He buys value. … But price is only part of value. There is a whole range of quality considerations which are not expressed in price” 

– Peter Drucker, Management: Tasks, Responsibilities, Practices

 

One of the questions I hear (frequently!) is “what’s a good price per ton for carbon removal?” Or a variant “What price is carbon removal converging on?” While it sounds like a shrewd question to ask, this assumes that all carbon removal tons are equal – that this is a commoditized market in 2024. Nothing could be further from the case. 

My argument in this post is not only that the attributes of projects and methods of carbon removal are highly variable, but that different customer segments perceive different benefits from carbon removal credits. I’m going to suggest a pricing analysis tool below which addresses these customer segment needs from a couple different angles – stay tuned! 

But before addressing these customer segments, let’s level-set with some terminology points.

 

First, Cost vs Price: These are different terms. A ‘Cost’ usually refers to the internal expenses needed for a supplier of a good or service to produce a unit for sale – in this case a voluntary market credit representing one ton of CO2 removed. (FOOTNOTE: Not talking about methane or nitrous oxide equivalents). These take into account labor, cost of the physical resources for production, energy, transportation, and cost of capital.

A ‘Price’ refers to what a producer of a good or service charges to a customer at exchange. The difference between Price charged to the customer, and Cost to the supplier is the Profit margin.

To illustrate, here’s a chart from a conference presentation I recently gave:

 

Second, Price vs Value: What a supplier charges to a customer for one carbon removal ton is NOT the sum total of the entire value that the customer derives from the purchase. The buyer of a carbon removal ton realizes a value beyond what the market price is that the seller charged for that ton – otherwise they would not have purchased it to begin with.

State of pricing today: A wide variety of value propositions to a customer lead to a wide variation of prices, especially since customers are in 2024 starting to figure out what the value to their organization is of the durable CDR credits purchased. 

Indeed, this is exactly what we are seeing in the 2023 State of CDR report (2nd Ed.) prices based on 2023 market conditions:

What price is the “right” price? They all are! Customers are not irrational, even though there is a high degree of variability in these CDR prices. For example, a customer believed that for Direct Ocean Capture CDR $1,402 per ton is a valuable ton to buy: they wanted to see the exchange happen. Another customer believed that for biochar a $131 ton of CDR is a valuable ton to buy. For each of these customers the price was justified by what they used the durable CDR ton to achieve.

Different customers had different rationales underlying their purchasing decision, value propositions, and thus different price points. The reason for purchasing could have been to neutralize Scope 1, 2, or Scope 3 emissions directly, could have been for branding purposes of being perceived as good stewards of the earth, or perhaps to lock in relationships with suppliers for future credits, or simply to signal support for early stage innovation. SBTi’s Beyond Value Chain Mitigation work offers examples of these reasons. 

 

My takeaway: the rationale for purchasing credits drives the perception of value, and thus the price a supplier is able to charge to cover their costs of supporting their business.

Evidence: These self-reported motivational customer segments are evident in the NASDAQ Global Net Zero Pulse report chart below (Sept 2024):

Granted these are for carbon credit markets writ large – i.e. traditional offsets and less durable nature-based solutions, not only for durable carbon removal – but I would offer that the structure stands, regardless of the type of carbon credit, be it avoidance, less durable CDR (<100 years), or higher durability CDR (>100 years). There is no monolithic rationale for buying durable carbon removal today. When a potential buyer reports that “prices of credits are too high”, the lesson is not that buyers think “you should find a way to lower your costs”, rather “prices are too high for what you are offering to meet what the customer views as valuable now”. The options for a startup to take, therefore, are either:

A) figure out a way to improve the value of the durable CDR credit delivered to the type of customer you are trying to address or 

B) Find a different customer who will find what you are delivering to be valuable.

Which leaves carbon removal suppliers at a standstill: if all prices are valid, then what should I charge?

One answer lies in a powerful survey tool that may be helpful: a Van Westendorp model. This technique can yield an acceptable price range for a given set of potential customers.

The four very specific questions asked in Van Westendorp analysis are:

      • At what price would you consider the product to be so inexpensive that you would feel the quality couldn’t be very good?
      • At what price would you consider the product to be priced so low that you would feel it’s a bargain?
      • At what price would you say the product is starting to get expensive, but you still might consider it?
      • At what price would you consider the product to be so expensive that you would not consider buying it?

The result, a chart that looks something like this example, with one line tracking each of the four questions, price points on the X-axis, and % of respondents who accept the price for that line description on the Y-axis (e.g. 80% of respondents consider $20 ‘Acceptably cheap’):

Source: sawtoothsoftware.com

And there are several ways of segmenting the data, assuming a large enough set of respondents. For instance, a survey team could segment by industry and see the different ranges represented there. Or ask intake questions (like in the NASDAQ survey example above) to divide up the respondent pool by motivations. Or conduct two sets of questions and change the delivery to be in 2025 vs 2030.

Additionally, you can ask these sets of questions twice, once for lower durability carbon removal, and another time for high durability carbon removal. Charts like the one above would have different price ranges for different purchase types. 

This would yield price ranges that offer a quantitative look at how much the value that a customer feels derives into a specific price that a supplier would charge. Then, suppliers would be able to focus on cost targets to become profitable and support their growth – and ability to satisfy the wants of new customers for their products.

The move from cost-based pricing to value-based pricing for CDR credits is just in its infancy, as many early stage technologies are just now starting to move down the internal cost curve. As internal costs decline in future years, startups can drive value by discovering a price point in line with what the customer’s willingness to pay will be, rather than purely to break even on operational costs. Even in the current market, CDR credit supply companies can learn a wealth of knowledge about building a value proposition story that unlocks a customer through offering additional benefits or driving home the message about the quality of carbon removal credits. And in doing so build sustainable businesses that use voluntary carbon markets to drive impact for the customers they serve as well as for the climate.

What do you think? Let me know here

Jason Grillo is a Co-Founder of AirMiners. The opinions expressed in this writing are the author’s own and do not reflect the position of any employer.