Today I’d like to help buyers understand what to look for in co-benefits when purchasing credits. How do you know if a carbon project’s listed community co-benefits are truly helping, or are causing harm?
Before I launch into a rubric for evaluation though, let me make four rather preachy points:
- Doing something about your pollution AND protecting/restoring an ecosystem is really great. There is no shame in supporting a project that is simply paying a private landowner to keep their trees intact. On the contrary. Kudos.
- Do community co-benefits even make sense for this project? From a first principles perspective, carbon credits are intended to pay someone compensation for not cutting down their trees (etc…). Someone would have earned $5,000 from timber or agriculture? Now they earn $5,000 from carbon. That’s a direct 1:1 compensation for a natural resource that’s being sold. Somewhere along the line it became the norm to ‘negotiate’ for that payment, and instead pay people indirectly through their community (by building schools, etc…).
- In some cases, community co-benefits are used as an excuse to avoid paying people for their natural resources. Co-benefits that improve the quality of life of the community are really great. However, they must be commensurate with the carbon value being extracted from the community. All too often “building six schools” represents a tiny fraction of the carbon value removed from the community.
- Carbon must take precedence. If the carbon numbers are not genuine, even if the co-benefits are great, this represents a major problem for at least three reasons: Pollution is still going into the atmosphere and everyone suffers from that (including the communities). The project could be subject to scandal if its credits aren’t conservative. This can lead to all community co-benefits evaporating. Now that South Pole has abandoned the Kariba project following a scandal about its carbon credits, it's unclear if the community will ever get paid. The end-buyer could suffer major reputational harm. If purchases are made based on pictures of smiling children rather than science, that will come back to bite the company buying the credits. Responsibility for bad offsets ultimately lies on the buyer in this wacky market of ours (since they're the ones with their name in the mud).
Now, for the rubric. Broadly, we (Renoster) places community co-benefits into three categories of decreasing worth:
1. Direct Payments
To Individuals - Our favorite carbon projects involve direct mass payments to individuals inside the project. They publicly report on every payment in giant lovable spreadsheets. This is the ultimate community co-benefit because it allows community members to spend their money, for their natural resource, as they wish. They will reinvest that money into their community through the local economy and taxes.
A core component to this approach is that all carbon project budgets should be made public. Especially in the developing world, there should be no doubt where every dollar is going. I call on Verra and the ICVCM to make this an explicit requirement for all REDD+ projects. Just stating that “Transparency” is a core principle means nothing without an explicit definition.
To Community Groups - Tracking and paying individuals in carbon projects the size of small nations is not always feasible. One alternative is to directly pay community groups and let them distribute funds to the communities as they see fit. Ideally, these groups would be pre-existing and democratically elected.
Most carbon projects have this type of reimbursement system through a Benefits Sharing Agreement. It is important that this agreement is made public, and that the community groups themselves are held accountable for the spending. Some of Renoster’s favorite projects manage co-benefits through this approach quite well – such as the Indus Blue Carbon project which created community groups of women to help equitably distribute the funds. One note however, is that an extra level of diligence is needed here. If the community groups consist of nothing but local strongmen or aren’t representative of the community, then major malfeasance can occur.
2. Tangible Benefits
Infrastructure - In massive REDD+ project direct payments are often difficult to manage – we don’t yet live in that glorious blockchain utopia of crypt/metaverse nonsense. In place of direct payments carbon projects often invest directly in the community through infrastructure projects. Common projects include schools, water treatment plants, communication infrastructure, and healthcare facilities. Certainly, Renoster likes to see these types of co-benefits. However, there are some important caveats when assessing them: Firstly, we need tangible benefits to be tangible. We need to see clear numbers about how much each project is costing, the sizes of these projects, reasonable timelines for completion, etc… Unfortunately sometimes these projects end up not panning out, and so it's important that lofty goals are tied to real dollars and cents.
Secondly, we need to ensure that infrastructure investments really add up to the same ballpark amount of money as is being extracted from the community. All too often carbon projects use fluffy infrastructure projects to hide the fact that <10% of the carbon value is being returned to the community. Here’s a simple tip for all carbon buyers: Add up all the direct payments to individuals, communities, and investments in infrastructure. Then compare that number to the amount of carbon credits the project is receiving times the market average. The two numbers should be in the same ballpark. Our favorite project to hate on – Kariba – had numerous “infrastructure co-benefits”, but it seems as if less than 5% of the project’s value ever made it to the community.
3. Intangible Benefits (junk benefits)
Finally, have those co-benefits that are impossible to measure and are frankly mostly used to avoid paying people their due. How does one quantify the value of a 2 hour seminar in a $100 million 30 year carbon project? Some of the most popular intangible benefits that we see are:
- Unscalable feel-good programs - These are often trainings or seminars given to groups of project inhabitants on fairly banal environmental topics. A ridiculous number of REDD+ projects teach people about beekeeping. Community gardening is another popular variant. As might be compost training. Now, this is not to say that inhabitants couldn’t benefit from beekeeping courses. But this is a low-effort way to avoid sharing the millions of dollars of income that many REDD+ projects generate. Imagine if you and your family had farmed land for the last 50 years, and now you’ve been told to stop, and in exchange, you get a beekeeping course. These programs really only have an impact if they lead to tangible changes to human development. After more than 10 years of many REDD+ projects earning tens of millions of dollars, we must wonder why many inhabitants are only marginally better off. Had Kariba distributed its +$100,000,000 to each inhabitant of the project, they’d have a completely different standard of living – rather than bees.
- Job Training - Imagine the injustice of taking someone’s natural resources away from them, and telling them that they need to pull themselves up by their bootstraps and find a new job. Can’t farm anymore? Here’s a one-day course on alternative revenue streams to make up for it. Rarely do these programs properly compensate people for their land rights. We are not talking about full-ride scholarships to universities here, we are usually talking about several days of lecturing.
- Employment - Many REDD+ projects do employ a lot of people, and they often pay higher rates than local opportunities. However, Renoster does not consider this to be a true co-benefit because rarely have we found that the number of jobs that a carbon project produces exceeds those jobs that would exist without it. Put simply: taking care of cattle usually requires more employees than taking care of trees.
Land Tenure
Securing land tenure for project inhabitants can be one of the most impactful benefits of a REDD+ project. Land tenure can be used as a financial mechanism to secure small loans, build equity, or credit – integrating developing communities into the global economy. However, it is one of the less tangible benefits on this list, and so we often only report on it positively. In a handful of instances land tenure programs in REDD+ projects have gone wrong – with communities ending up with smaller amounts of land than they traditionally had managed, or with full land tenure not taking place. Some diligence is required to get to the bottom of this co-benefit.
Take-aways
There’s really only one takeaway here: Money flowing out of a community in the form of carbon offsets needs to be balanced by money flowing in. There are a variety of co-benefits that can be employed to do this, but at the end of the day, the value of co-benefits needs to be measured in dollars and cents rather than pictures of smiling children.
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