Our previous blog series on risk covered the inherent risks of nature-based carbon projects. The risks vary from geographic to commercial to operational, ultimately presenting carbon buyers with uncertainty about carbon credit purchases. 

In this blog, I will cover another type of risk buyers might face when purchasing carbon credits: the scenario in which credits that have been issued, and in some cases sold, are retracted or cancelled by the registry on which they are listed. I will also explain how Treeconomy can help reduce this risk.

Retracted and cancelled credits are credits that the registry once issued. However, the registry retracts or cancels them due to reversal scenarios or concerns about validity, legality, or authenticity. 

 Retracting  or cancelling can occur for several reasons:

1. Reversal - This occurs when carbon absorbed from the atmosphere is re-released after the project is completed. In this instance, the registry will cancel the credits that no longer exist and compensate buyers with a replacement from a buffer pool.

2. Suspension - This can occur when the registry (E.g. Verra) determines that there has been illegal or unethical behaviour on a project, and the project proponent is suspended from the registry. An investigation follows in which credits may be cancelled.

3. Overcrediting - This can occur for a variety of reasons. It can be unintentional, where a project developer and the registry predict that a project will generate more credits across its lifetime than it does. It can, however, also be intentional, where a project developer intentionally over-issues credits to generate more income from the project.

Cancelled credits, whether intentionally or unintentionally, are a risk for buyers. They can result in buyers being compensated from buffer pool credits, over which they have little choice and control, or simply losing their investment if no compensation is available. 

The good news is that these factors can be managed, and Treeconomy expertise can help mitigate and minimise these risks for developers and buyers. Here is how:

Treeconomy’s ongoing monitoring provides buyers with certainty that the projects they have purchased credits from are performing and continue to exist and thrive under good management. Our monitoring allows developers to quickly identify areas of underperformance and implement necessary management measures to allow the ecosystem to thrive and the carbon credits to be delivered. 

2. Suspension

Treeconomy works with a network of trusted developers worldwide. We conduct due diligence on our developers, considering their experience, prior project work, and company governance. We work with trusted partners who share our vision of developing high-integrity, high-impact, nature-based carbon removal projects. 

Treeconomy also conducts thorough project-level due diligence. We critically examine projects considering additionality, baselines, carbon monitoring, ongoing monitoring, and ethical, social, and non-carbon benefits. You can read more about our due diligence here. 

Through these two avenues of due diligence, Treeconomy ensures that the projects we sell credits from are of the highest quality and integrity, minimising the risk of project or developer suspension and mitigating risks for buyers. 

Treeconomy’s efficient, scientifically rigorous assessments of project areas ensure that the true impact of project interventions is being measured and buyers and developers are kept up-to-date and informed. This allows us to identify deviations from the predictions early and update the registry, developer, and buyers to adjust purchase orders to ensure no over-crediting. 

Treeconomy can help. We focus on bringing high-quality carbon removal credits to market, developed by high-quality project developers. Our due diligence and carbon monitoring help protect carbon buyers from the risk of their credits being cancelled. Don't hesitate any longer. Explore our marketplace or contact us at hello@treeconomy.co to take the first step toward achieving your climate targets.