At the heart of carbon offset projects lies the potential to achieve more than greenhouse gas (GHG) emissions reductions. Co-benefits, the additional positive outcomes that these projects can deliver, span across various dimensions.
From bolstering biodiversity and water quality to enhancing public health (often seen in REDD+ projects), and fostering economic development, co-benefits enrich both the environment and local communities.
They offer a bridge between the immediate goals of carbon reduction and the broader objectives of sustainable development, highlighting the interconnectedness of our ecological, social, and economic systems.
The integration of these elements aligns closely with the UN SDGs, highlighting the broader significance of carbon projects.
In this article you will learn about:
- Sustainable Development Goals (SDGs) and Co-Benefits
- Environmental, Social, and Governance (ESG) and Co-Benefits
- Community Engagement as a Key to Success
- Financial Risk Mitigation
- Sustainability of Benefit-Sharing
- Challenges in Quantifying Co-Benefits
- The Road Ahead: Vision for Co-Benefits in Carbon Markets
- Webinar Recording
Sustainable Development Goals (SDGs) and Co-Benefits
The interconnectedness of carbon credits and the17 Sustainable Development Goals (SDGs) lies in their mutual aim to combat climate change and foster sustainable development. Each SDG, has specific targets and underlying indicators to measure progress towards them, making them a useful tool to quantify and standardize co-benefits of carbon projects.
Introduced by the United Nations in 2015, the SDGs comprise 17 global objectives designed to eradicate poverty, safeguard the planet, and promote well-being for everyone. These objectives span a wide range of sustainable development aspects, from poverty alleviation and education to gender equality, clean energy, sustainable consumption, and climate action.
Carbon credits, in contrast, serve as a tool for reducing emissions of greenhouse gasses.
Credits are issued to projects that either mitigate or capture carbon dioxide and other GHGs from the atmosphere, these initiatives may involve renewable energy generation, increasing energy efficiency in industrial or domestic settings, or undertaking afforestation and reforestation efforts.
But the SDGs have seen mixed progress. While some advancements are evident, approximately half of the SDG targets are notably behind schedule, with moderate to severe deviations from their intended paths.
Furthermore, around 30% of the targets have either stagnated or regressed since their inception in 2015.
At the SDG Summit on 19 September 2023, UN Secretary-General Antonio Guterres addressed the world’s leaders, emphasizing the urgent need for unprecedented investment in development.
This call to action highlights the critical importance of accelerating efforts to meet the SDGs within the remaining timeframe.
Leveraging SDG-Oriented Co-Benefits for Enhanced Value
An interesting aspect that underscores the value of integrating co-benefits into carbon projects is the approach of platforms like Viridios AI (VAI).
By framing co-benefits in the context of SDG pricing and price premium prediction for spot and forwards, Viridios AI delivers an excellent analytical advantage to its users. There’s a noticeable difference in how a project could be priced with or without co-benefits over the next ten years, emphasizing a substantial price premium.
This trend is supported by findings from the Gold Standard Impact Registry, indicating that most projects contribute to at least three SDGs. This not only showcases the intrinsic value of co-benefits but also demonstrates how they can enhance the economic viability and attractiveness of carbon projects in the market.
Viridios AI utilizes artificial intelligence to extract the SDGs delivered by projects. In the table below, you can see data on which SDGs are more likely to be found in projects within VAI’s taxonomy.
Environmental, Social, and Governance (ESG) and Co-Benefits
ESG considerations are increasingly becoming a strategic imperative for corporations as they start to see their operations from a more impact-oriented perspective, influencing decision-making processes and investment priorities.
For example, if you, as a corporate, invest directly into a project and become a shareholder of the project, your company becomes exposed to those ESG metrics. The ‘E’ in ESG stands at the forefront of carbon projects, primarily focusing on environmental stewardship.
While carbon reduction is the primary goal, the environmental aspect of ESG encourages a broader view. This includes biodiversity conservation, water resource management, and overall ecosystem health.
Carbon projects are now being evaluated not just for their emissions reduction capacity, but also for their impact on biodiversity and natural systems (Environment), their impact on the communities they serve (Social), and how the project is administered and run (Governance).
Carbon programs or standards often incorporate these considerations in their mandated Social and Environmental Safeguards.
These detail environmental considerations that go beyond carbon reduction, focusing on broader ecological impacts. The social aspect involves fair labor practices, community health, and education, aligning with various SDGs.
Lastly, the governance considerations encompass ethical conduct and transparency, ensuring accountability and maintaining investor confidence.
Community Engagement as a Key to Success
A pivotal aspect of successfully integrating co-benefits into carbon projects is the active and meaningful engagement of local communities, adapting the project activities to their cultural context.
Projects that are designed and implemented in close collaboration with the communities are more likely to deliver on the carbon emissions reduction goals because they have the community’s support.
This participatory approach ensures that projects are not only environmentally sound but also socially equitable, addressing the needs, aspirations, and cultural practices of local populations.
By involving communities in the decision-making process, projects can build trust, foster local stewardship of natural resources, and ensure that the benefits of carbon projects are shared fairly and widely. This approach improves the permanence of the carbon stock associated with the project as well.
An important part of this process is the Free Prior and Informed Consent (FPIC).
It’s crucial for projects to ensure that communities are informed about and consent to what’s happening on their lands. Additionally, it’s essential that individuals or communities governing the land are involved in the project design and benefit-sharing mechanism.
There must also be clear documentation to ensure all impacted stakeholders are informed about the potential benefits, risks, and costs associated with the project in order to secure their consent.
Another vital aspect is partnering with project developers who can maintain open communication channels with the communities while the project is in operation. This approach guarantees that any public grievances and necessary feedback for the project’s successful operation are heard, considered, and implemented within the project itself.
Furthermore, beyond the factors that need consideration during the project design and preparation for implementation, there must be a continuous feedback loop. This loop should provide insights into what’s working and what isn’t.
Financial Risk Mitigation
One critical point lies around the concept of financial risk mitigation in carbon projects.
This facet is crucial, as it underscores the importance of designing projects in a way that not only delivers environmental and social benefits but also safeguards against market volatilities and financial uncertainties.
The integration of co-benefits into carbon projects does more than enhance their environmental and social impact; it also serves as a financial risk mitigation strategy.
The projects with the most potential to contribute to SDGs, are those that rely the most on the community for the project’s success.
For example, REDD+ projects will not effectively deliver carbon emissions reductions if the underlying causes of deforestation are not addressed. As such, for a REDD+ project to be effective, it must engage closely with the community to understand the challenges that are behind the unsustainable use of the forest.
The project may then end up enabling alternative sources of income, training on sustainable farming or agroforestry practices, etc. If no meaningful alternatives or solutions are brought to the communities that rely on these forests, any other efforts are unlikely to deliver the expected results of halting deforestation and degradation.
Sustainability of Benefit-Sharing
For a project to successfully deliver the emissions reductions it aims for, it is critical that the community sees the direct benefits of the project to secure their buy-in. This is often formalized through a benefit-sharing agreement, where both parties agree on how the project’s revenues will be shared.
Benefit-sharing, in the form of services to the communities or cash, is subject to fluctuation with market conditions. To mitigate these risks, it is imperative to establish benefit-sharing frameworks that align with the community’s needs. Community engagement at the project’s inception becomes paramount in determining effective frameworks.
For instance, implementing enduring and meaningful project activities as part of Capital Expenditure (CAPEX) for projects like Afforestation, Reforestation and Revegetation (ARR) in India involves building infrastructure that consistently benefits the community, irrespective of project success.
Failing to properly execute these frameworks could leave communities destitute after a project failure, with consequences borne by them despite no fault of their own. As the Voluntary Carbon Market (VCM) evolves, incorporating co-benefits into an investment tranche may offer a strategic approach, prompting the need for careful consideration and strategic thinking.
The significance of co-benefits extends beyond just market value. They play a critical role in building trust with local communities and stakeholders. This trust is fundamental in maintaining the long-term viability and sustainability of carbon projects.
Challenges in Quantifying Co-Benefits
While the value of co-benefits is widely recognized, quantifying and standardizing these benefits poses significant challenges.
Unlike carbon emissions, which can be measured in tons of CO2 equivalent with well-established methodologies that address the issue of additionality and permanence, co-benefits encompass a wide range of outcomes, each requiring different metrics for measurement. The lack of standardized metrics complicates the comparison, valuation, and verification of co-benefits across projects.
Developing robust, universally accepted methodologies for quantifying co-benefits is crucial for enhancing transparency, credibility, and effectiveness in the carbon market. It will also enable project developers, investors, and stakeholders to make more informed decisions and recognize the full spectrum of benefits that carbon projects can deliver.
The Road Ahead: Vision for Co-Benefits in Carbon Markets
Looking forward, the concept of co-benefits is set to play a central role in shaping the future of carbon markets.
As awareness of the interconnectedness of climate action and sustainable development goals, there is a growing demand for carbon projects that deliver a broader array of benefits.
This shift towards a more holistic view of carbon offsetting presents an opportunity to drive innovation, enhance the sustainability of projects, and maximize their positive impact on both the environment and society.
The development of standardized metrics for co-benefits, alongside increased transparency and stakeholder engagement, will be key to realizing this vision.
The integration of co-benefits into carbon projects represents a profound evolution in the approach to addressing climate change and promoting sustainable development.
By moving beyond the narrow focus on carbon reduction to embrace a wider array of environmental, social, economic, and educational benefits, carbon projects can play a pivotal role in building a more sustainable and equitable world.
The journey towards fully realizing the potential of co-benefits in carbon markets is complex and fraught with challenges. Yet, it is a journey that offers immense promise for enhancing the effectiveness, credibility, and impact of carbon offsetting initiatives.
As we navigate the future of carbon markets, the focus on co-benefits will undoubtedly be a defining feature, shaping the path towards a more holistic and impactful approach to climate action and sustainability.
If you want to learn more about SDGs, co-benefits, and carbon markets, schedule a time with one of our specialists.
The recording of the ‘The Vital Role of Co-Benefits’ webinar is available here:
About the author:
María Elisa Vollmer is Head of Project Data at Viridios AI. She has five years of experience in sustainability consulting for the public, private, and non-profit sectors. Her diverse background blends international development, environmental policy, and economics. She has a Master’s in Applied Economics from George Washington University and an undergraduate degree in Environmental Policy and Planning from Virginia Tech.
Mariana Marins is Content Marketing Manager at Viridios AI. Mariana has 9 years of experience in marketing across different markets and companies, both in the non-profit and private sectors. Her background includes marketing and GTM strategies, CX, inbound marketing, SEO, and content production.She holds a Bachelor’s degree in Communications/Marketing, a MBA in Business Management and Design Thinking, and an Innovation Leadership Program Certificate from The Hebrew University of Jerusalem.