MRV — Measurement (or Modelling?), Reporting & Verification

Many carbon credit methodologies do not actually measure carbon. Is it important and what are the alternatives to drive investment in carbon removal and regeneration if carbon markets do not actually measure their impact?

First, let me be clear — Carbon and environmental markets are a crucial part of efforts to avert climate catastrophe. Even within a deep decarbonisation scenario we still need to remove?10GTpa of CO2e?(Carbon Dioxide Equivalent) from the atmosphere just to hit Net-Zero by 2050. Given the continued absence of a globally agreed response, such as a universal price on carbon, voluntary actions driven by responsible corporations and individuals are necessary to support projects that remove or avoid CO2e emissions.

Forests are one of the most important of these carbon removal efforts. Each year they absorb around 15 billion tonnes of Carbon Dioxide and other GHG emissions, equivalent to roughly 40% of global CO2 emissions. Reforestation is a well-regarded nature-based solution for carbon markets. It’s the best technology we have available today (excluding cutting emissions in the first place) to remove excess greenhouse gases. So, let’s start there.

When developing a reforestation carbon removal project how are carbon credits generated? And how is a project’s impact (the amount of CO2e removed from the atmosphere) measured to generate a carbon credit? It may sound simple but it’s not.

                             Visual Capitalist        

Let’s firstly look at the Australian Emissions Reduction Fund (ERF) “Carbon Credits (Carbon Farming Initiative) (Reforestation by Environmental or Mallee Plantings — FullCAM) Methodology Determination 2014”. Under this methodology, additionality is determined as follows

• A project must be new
• Go beyond business as usual activities
• Not be required by law.

Trees in sample plots need to be directly measured per the?Carbon Farming Initiative (CFI)?guidelines using infield measurements to calculate the carbon stored by the project. Crediting is based on carbon sequestered by the trees as they grow.

It’s a long piece of federal legislation so let me break it down in simple terms how it works in practice :

1. Eligibility must be determined e.g. has the land been clear of forest for at least 5 years
2. A Carbon Estimation Area (CEA) and exclusions zones are defined per?CFI Mapping Guidelines
3. The estimated total carbon stock in the CEA is calculated based on the?Full Carbon Accounting Model (FullCAM)
4. The project is audited to ensure it complies with the statements

FullCAM was developed under the Australian National Carbon Accounting System (NCAS) based on the realisation that measured approaches were impractical, especially in a land as vast as Australia. Instead, data sets were collected and fed into the model. Most of those data sets were integrated from earlier?existing models

• 3PG (growth of trees, allocation of carbon, and turnover of residues)
• GENDEC (litter decomposition)
• RothC (soil carbon turnover)
• CAMFor (integrative tracking of carbon in managed plantations)

As a modelled approach FullCAM does not require actual physical measurements and is inherently conservative in its estimates of carbon sequestration potential. The below table, taken from trials conducted on farms in New South Wales, Australia, shows a wide variance in measured vs modelled soil carbon. This suggests the model is not capturing the full sequestration potential thereby shortchanging the project participants. The variance listed in the table below is per year so over the lifetime the income-earning loss can be dramatic.

For example, assume the following project parameters for lot LA0690

• A 5-year project
• Over 1000 Ha’s
• A carbon credit price of $25/t

Then

• Predicted Soil Carbon change : 0.41C x 1000ha x 5yrs = 2,050tC
• Measured Soil Carbon change : 1.01C x 1000 x 5yrs = 5,050tC

As such

• Predicted earnings : 2,050tC x 3.666 = 7,515tCO2e (ACCUs)
• Measured earnings : 5,050tC x 3.666 = 18,513tCO2e (ACCUs)

Total variance in earnings : (18,513–7,515) x $25/t = $275k difference

As shown, the “loss” in earnings from a carbon project is significant when using a modelled vs measured methodology. This is generally due to the need for modelled analysis to err on the side of caution.

              Australian Farm Institute, August 2021        

Let’s have a quick look at Verra’s VCS “Methodology for Afforestation, Reforestation, and Revegetation Projects” currently under development. This methodology is proposed to replace/support several similar methodologies and is based on earlier methods developed under the UN’s Clean Development Mechanism.

Again a really simple, quick summary

1. Select Carbon Pools (trees, vegetation, roots, dead wood, soil carbon) in a defined project boundary
2. Establish a baseline for carbon pools.
3. Estimate the increase in vegetative stocks through visual observation using google earth or another technology such as LIDAR
4. Confirm additionality
5. Calculate the amount of carbon sequestered
6. Validate the carbon sequestered based on models, default values or literature (see below)

            IPCC default values for changes in Soil Organic Carbon        

As shown, carbon removal projects via reforestation credits are generally built upon statistical modelling that estimates the amount of carbon captured. But even they require expensive, laborious, manual processes to try and quantify the amount of carbon estimated to be sequestered.

Based on current market inputs the cost to initiate this project, excluding actual costs for land management changes, is around $100-$150k including (not an exhaustive list)

• Issuance costs from the registry (variable and fixed)
• Project management costs
• Compliance costs such as auditing
• Soil sampling ($100/ha if required)

This is just to get it registered with a certification scheme. On top of this, a landowner would typically incur expenses such as

• Land management change (eg cost of planting trees, loss of income from cropping, putting in new fences, maintaining the plantings)
• Fees paid to intermediaries on the credits generated (typically 20–30% of the value of the credits)
• Sales assistance/brokerage fees to sell credits generated

Then there is the time involved. It is an estimated 18-month wait to have your project registered and then perhaps 3–5 years till you receive the first credits subject to the time it takes to be able to measure the amount of carbon removed.

As such, even though no one is out there measuring how much carbon is being sequestered from the atmosphere, there are still significant costs involved even before a tree is planted and afterwards.

Carbon markets are already complex, as covered in my article?here. If all these methods are estimating, rather than measuring, the amount of carbon being avoided or removed how can the market participants we initially outlined be sure of what they are getting?

To function properly, markets require a liquid pool of fungible credits from which actors on both sides of the table can transact. Buyers and sellers of credits are assumingly comfortable with the notion that 1 carbon credit equates to 1MT of CO2 removed or avoided. That makes sense — for something to be traded it needs to be measured and all of these credits are built upon the very physical and measurable standardised quantum of 1MT CO2e. But is it right?

Don’t get me wrong, carbon markets or their equivalent are essential. But could there be a better alternative? Instead of inaccurate estimations of carbon removed why don’t we use available technology to quantify carbonic changes in biomass? Can we create an action-based market — one that incentivises and rewards actions (planting trees)? Can this be adequately quantified based on the models and benchmarks used in the current methodologies? Does this help carbon markets scale by removing much of the cost and complexity embedded into the quantification efforts of carbon markets? Does it make environmental impact more accessible to voluntary carbon credit buyers — those organisations putting their dollars into projects which align with their values to address climate change? Can technology be automated to a point that it dramatically reduces the cost of measurement, reporting and verification processes?

These are things we are exploring as we build Katalyst.Earth.