Sprint 2: Finance & Buyer Side
Harnessing a market perspective to develop reliable, high-integrity CSC credits
Amsterdam, July 3, 2023 Mid-sprint report
The big picture
Construction Stored Carbon (CSC) is fundamental to the creation of carbon removal credits that reward carbon storage in the built environment and function as transition finance for the construction industry. Given the challenges described in the previous sprint report, the industry’s need for CSC credits is abundantly clear. However, the introduction of a new credit class to the Voluntary Carbon Market (VCM) – and, more specifically, to the market for carbon removal credits – is no easy task. To ensure the functionality and reliability of CSC credits, market parties such as buyers and regulatory institutions must be included in their development process. Additionally, we must transparently communicate the benefits and shortcomings of CSC credits in comparison to other carbon removal credits classes to these parties.
As the International Emissions Trading Association (IETA) describes, the VCM is a ‘bottom-up’ market initiative aimed at providing a credible way to certify greenhouse gas (GHG) emission reductions and removals, outside of any compulsory climate action. Private and public organisations rely on the VCM to offset their residual, unavoidable emissions – a vital part of Corporate Social Responsibility (CSR).
Growing exponentially, the VCM reached a size of $2 billion in 2021 and is projected to grow towards at least $10 billion in 2030. However, recent critiques (e.g., from the Guardian) on carbon credits for emission reduction or prevention have led to a decreased trust in the VCM. As a response to these critiques, a market for carbon removal credits has emerged: credits that only quantify and reward tangible, long-term carbon storage. This development is backed by the European Commission (EC), that has emphasised the importance of carbon removals:
“The EU has committed to reaching climate neutrality by 2050 to secure a liveable future on our continent and our planet. The first and most urgent priority is the reduction of EU greenhouse gas (GHG) emissions. At the same time, the EU needs to compensate for residual emissions that cannot be eliminated, by scaling up carbon removals, or in other words by removing carbon dioxide (CO2) from the atmosphere.”
Additionally, the EC proposed a framework for certification of carbon removals, to ensure the integrity and reliability of carbon removals. This framework is fundamental to our intervention: without an independently issued and verified certificate, no credits can be issued for a carbon removal activity. For more information on the EC certification framework, read our LifeLabs for Sprint 3 and Sprint 4.
Ever since the controversy around emission reduction and prevention, carbon removal is on the rise. The open-source platform cdr.fyi tracks carbon removal credit sales, and shows that 4 million tonnes of CO2 have been purchased at the time of writing, with roughly 3 million tonnes bought since March 2023. However, the platform also shows that the price of these credits fluctuates heavily and depends mostly on the removal method used. This emphasises the need for effective communication on the characteristics of CSC-class removal activities and transparent price-setting. Among others, guiding examples of price-setting include recent carbon removal credit purchases (e.g., by JPMorgan Chase and Microsoft), and governmental price-setting (e.g., by the Dutch province of Utrecht (link in Dutch), that considers pricing CO2e at €875 per tonne in their decision-making frameworks).
Goals of Sprint 2
- Develop simple (visual) means to communicate the functionality, (potential) benefits and shortcomings of CSC credits;
- Involve organisations participating in the VCM into the CSC credits development process;
- Find buyers for the world’s first CSC credits issued for pioneering (pilot) projects.
- Develop an approach to transparent and equitable price-setting for CSC credits.
Results of Sprint 2
- Market for carbon storage launched
As the first construction and development company, Ballast Nedam Development took the groundbreaking step of trading CO₂ storage in its housing projects. These construction projects utilize ‘biobased’ building materials like wood, hemp, and straw, storing CO₂ for over 100 years during their lifespan. By assigning a financial value to this storage, climate-positive projects can compete with polluting alternatives like concrete and steel, driving demand for biobased materials and potentially transforming the entire construction sector.
To establish biobased construction as a reliable climate solution, they participate in a research project by Climate Cleanup Foundation. Climate Cleanup certifies and values the stored CO₂ in biobased buildings according to European and international guidelines. Only projects with positive effects on biodiversity, health, and circularity can obtain a CO₂ storage certificate, generating revenue through sales to companies and governments.
On December 6, 2023, Ballast Nedam Development and Climate Cleanup Foundation announced their collaboration, introducing the trading of CO₂ storage for three projects. The first project, the ‘Natuurhuis,’ is climate-positive, sequestering more CO₂ than the entire construction process emits. Soon, projects in Amsterdam such as ‘Strandeiland’ and ‘Horizons’ will follow. This collaboration opened the international market for CO₂ storage in climate-positive building projects.
This sprint is still in progress. Results will be shared periodically. Want to stay in the loop? Sign up for our newsletter!
- The Evolving Voluntary Carbon Market A Paper by the Members of IETA https://www.ieta.org/resources/Resources/Reports/The%20Evolving%20Voluntary%20Carbon%20Market_web.pdf
- Guardian investigation into Verra carbon standard finds that most are ‘phantom credits’ and may worsen global heating https://www.theguardian.com/environment/2023/jan/18/revealed-forest-carbon-offsets-biggest-provider-worthless-verra-aoe
- European Commision Questions and Answers on EU Certification of Carbon Removals https://ec.europa.eu/commission/presscorner/detail/en/qanda_22_7159
- Cdr.fyi, a community driven effort to bring transparency and accountability to the carbon removal market https://www.cdr.fyi/
- JPMorgan Chase to spend $200 million on carbon dioxide removals https://www.reuters.com/sustainability/jpmorgan-chase-spend-200-mln-carbon-dioxide-removals-2023-05-23/
- Microsoft will pay to capture carbon from burning wood https://www.theverge.com/2023/5/15/23724418/microsoft-carbon-capture-burning-wood
- CO2-beprijzing in maatschappelijke kosten- en batenanalyses provincie Utrecht https://www.stateninformatie.provincie-utrecht.nl/documenten/SB-CO2-beprijzing-in-maatschappelijke-kosten-en-batenanalyses-provincie-Utrecht.pdf
Sprint 1: Ecosystem Formation
Frontrunners tackle the Construction Stored Carbon monetisation challenge
Sprint 3: Draft Protocol
Sprint 4: Institutional Alignment
Sprint 5: Pilot Projects
Stay in the loop on our Construction Stored Carbon interventions and contribute!