Realizing the social value of impermanent carbon credits

Background

Nature-based solutions (NbS) for carbon sequestration provide additional benefits outside of climate change mitigation, such as protecting biodiversity and local livelihoods. However, NbS projects struggle with financing due to challenges demonstrating additionality, avoiding overestimation of carbon storage, establishing metrics to compare NbS with technological projects, and accounting for project impermanence (i.e., the future risk of carbon being released into the atmosphere due to fires, deforestation, disease, or severe weather events).

Goals and Methods

The authors present the Permanent Additional Carbon Tonne (PACT) framework to address the limitations of current carbon accounting methods. The PACT framework uses the avoided social costs of carbon (i.e. the long-term damages caused by releasing one additional ton of carbon dioxide equivalent [CO₂e] into the atmosphere) from impermanent NbS projects to calculate estimates of permanence (EP), which are used to assess how many impermanent credits are comparable to technological offset options. The framework also incorporates long-term periodic monitoring of carbon release from the site to correct estimates and compensate project providers.

Conclusions and Takeaways

EPs from three different scenarios (temporarily reduced deforestation, restoration to timber plantation harvested after 40 years, and restoration to fire-prone woodland) resulted in costs of $80-160 per ton of CO₂e. These credits are more expensive than current market prices for NbS projects, but they are still competitively priced compared to technological offset options ($140 per ton of CO₂e on average). The benefits of using the PACT framework include incorporating concerns about credit impermanence into the assessment, which promotes investor confidence, and potentially increasing periodic project monitoring, thereby incentivizing project providers to implement management strategies that enhance permanence and additionality.