Carbon Credits for Oil and Gas Projects: Assuring Integrity

On July 27, 2023, the Integrity Council for the Voluntary Carbon Market ( The Integrity Council for the Voluntary Carbon Market (ICVCM) ) published its highly anticipated assessment framework to be used to gauge whether or not carbon credits that have been issued meet the ICVCM’s Core Carbon Principles.?

ICVCM is the body that establishes protocols to assure that carbon credits are actually doing what they purport to do. ICVCM follows the guidelines of the International Carbon Reduction and Offset Alliance (ICROA) which were established in tandem with the Kyoto Protocol for reducing greenhouse gas (#GHG) emissions.?They operationalize the 1992 United Nations Framework Convention on Climate Change.

The timing could not have been better.?Scandals regarding forestry and agricultural carbon credits resulted in plunging prices on the carbon exchange, and something needed to be done to inspire confidence (perhaps not the right word) and trust in the process and the validity of #carboncredits purchased by companies needing carbon offsets to achieve their carbon footprint reduction goals, and make progress toward #netzero.

For individuals involved in the now 20-year history of carbon credits, carbon exchanges, and carbon offsets, the overall attitude was one of relief that there would be more oversight on projects and an assurance that promises made over the life of a 20-year project would be complied with 5, 10, 15 years into the project.?In short, projects must demonstrate throughout their total duration that they are transitioning to net zero, that the carbon footprint reductions are permanent, that they are additional (and would not have occurred without the project), and are robustly quantified, with accepted and validated measurement methods and monitoring, along with reporting.

New Entrants to Carbon Projects Have Deeper Questions

For companies with oil and gas projects, which are new entrants into the world of carbon credits, and methodologies for calculating metric tons of carbon taken out of the atmosphere thanks to plugging orphan, abandoned, and idle wells, the ICVCM announcement caused some to ask for more clarity and transparency in the process.?

1. ·?????How does one calculate the number of metric tonnes of CO2 equivalent in the plugging of wells that have fugitive methane emissions?
2. ·?????What is the value of each barrel of oil left in the ground rather than produced?
3. ·?????What are additional carbon footprint reductions that will occur due to the plugging of the well? (no need to haul off and dispose of produced water, no need for heater-treaters, no need for gas compressors)
4. ·?????What are the ways to develop a program that has third-party validation of measurement and monitoring to assure compliance with the conditions of issuance?

Oil and Gas Carbon Registries

Carbon registries As of July 27, the carbon registries with methodologies for calculating carbon credits for plugging oil and gas wells include:

• ?????@ACR American Carbon Registry (ACR): Focus on orphan gas wells, but has a methodology for oil wells
• ·?????ZeroSix: Marginal oil and gas wells as well as orphan wells
• CarbonPath :?Orphan wells, idle wells, and abandoned
• BCarbon (in progress):?Orphan, abandoned gas wells
• Verra (in progress):?Orphan wells (TBD if oil as well as gas)

Buying and Selling Carbon Credits

It’s one thing to generate carbon credits and to sell them either on the spot market or in registered exchanges. It’s another to try to use your carbon credit to offset your carbon footprint.?This is when the third-party verification and validation of your project becomes of paramount importance.?ICVCM conducts assessments with the new framework to award verified carbon standards, and demonstrate compliance with the Core Carbon Principles.

Receiving a Core Carbon Principle validation means that both buyers and sellers have trust in the project and that what they are buying is a robust and auditable project with physical measurements on demand.

Methods of Buying and Selling

There are two ways to buy and sell carbon credits. The first is through the spot market where the carbon credit certificates can be sold for an agreed-upon price.

The second is through verified carbon exchanges. The premier carbon exchange is ACX (AirCarbon Exchange) , a bona fide commodities exchange that utilizes a blockchain and smart contracts. Launched in 2021, they are a true commodities exchange. Transactions are in U.S. dollars (not cryptocurrency).

Carbon Credit Ratings

While all carbon credits from projects can be bought and sold on carbon exchanges, projects vary in type, scope, and size. They may be agricultural, forestry-based, or now, oil and gas.?To provide buyer a sense of assurance, companies such as Sylvera have emerged with an analytics platform that rigorously examines the carbon projects and their performance.

Sylvera , a London-based company established in 2019, evaluates carbon projects and issues ratings. The Sylvera rating assesses the likelihood that the credits issued by a carbon project have delivered on their claims of avoiding or removing one metric ton of carbon dioxide (tCO2) or other greenhouse gases (GHGs).

The Future

With ever-increasing needs to reduce GHGs and their carbon footprint, companies are increasingly motivated to purchase carbon offsets. As the market and number of projects grow, it will be imperative that the projects demonstratively adhere to industry standards in order to maintain trust and robust value.