Carbon Financing for Social Impact: How To Successfully Sell Carbon Credits To Fuel Your Organization’s Growth

The carbon credit market has experienced substantial growth over the past decade. According to a recent report from Ecosystem Marketplace, the value of voluntary carbon markets hit a record high of $2.1 billion in 2021, reflecting a nearly 300% increase from the previous year. The market’s all-time value as of 2023 has reached $10.8 billion, driven by increased corporate commitments to net-zero emissions and the growing role of carbon markets in achieving the goals of the Paris Agreement.

Nonprofits and social enterprises, such as TaroWorks’ clients Impact Water and Proyecto Mirador, generate funding for their operations from the carbon offsets their work produces. However, before realizing the benefits of selling carbon credits, organizations need to develop processes and employ technology to manage carbon credit programs effectively.

This article provides a comprehensive guide on leveraging this market to fund your organization’s mission. You’ll learn about the fundamentals of carbon credits, the steps involved in developing and selling carbon offset projects, and the crucial role of verification and technology in this process. Through insights from industry experts and real-world examples, we’ll show you how organizations like Impact Water and Proyecto Mirador have successfully used carbon credits to scale their operations and enhance their impact.

What Are Carbon Credits?

Carbon credits are permits that allow the holder to emit a certain amount of carbon dioxide or other greenhouse gasses. One credit permits the emission of one ton of carbon dioxide or the equivalent in other greenhouse gasses. These credits are part of a broader strategy to reduce global emissions and combat climate change. There are two main types of carbon credits: compliance credits and voluntary credits.

Compliance Credits: These are used in cap-and-trade systems, where governments set a cap on the total amount of greenhouse gasses that can be emitted by companies. Companies that exceed their cap must buy credits from those that pollute less. This creates a financial incentive for companies to reduce their emissions. Major markets for compliance credits include the European Union Emissions Trading System (EU ETS) and California’s Cap-and-Trade Program.
Voluntary Credits: These are bought and sold on voluntary markets by companies and individuals who want to offset their emissions but are not required to by law. Voluntary credits often fund projects that reduce emissions, such as reforestation, renewable energy, and methane capture projects. The voluntary market has grown significantly as more organizations commit to sustainability and carbon neutrality.

How to Sell Carbon Credits

To explore the intricacies of selling carbon credits, we convened a panel from across the carbon credits value chain to discuss how nonprofits and social enterprises can leverage mobile technology to turn carbon offsets into cash that helps fund their operations. The panel included Julie Brown, Director of Operations & Finance at Impact Water; Jennifer Louie, Executive Director at Nexus for Development; Stevan Simich, Founder & CEO of Mogli Technologies; and Brent Chism, Strategic Advisor for TaroWorks.

Carbon credits represent a reduction of one metric ton of carbon dioxide emissions, either through avoiding emissions or removing carbon from the atmosphere. Organizations can sell these credits in carbon markets to companies looking to offset their carbon footprints. Carbon offset projects often involve initiatives like reforestation, renewable energy installations, and improving energy efficiency in communities.

Selling carbon credits involves several steps, including project development, verification, and marketing. Here’s an overview of the process:

Develop a Carbon Offset Project: This involves identifying and implementing projects that reduce greenhouse gas emissions. Common projects include renewable energy installations, energy efficiency improvements, reforestation, and methane capture from landfills or agriculture.
Verification and Certification: Before carbon credits can be sold, the project’s emissions reductions must be verified by an independent third party. This verification ensures that the emissions reductions are real, measurable, and permanent. Certification standards such as the Verified Carbon Standard (VCS) and the Gold Standard provide frameworks for verifying and certifying carbon offset projects.
Register the Project: Once verified, the project must be registered with a carbon credit registry, which tracks the issuance, transfer, and retirement of carbon credits. Registries such as the American Carbon Registry (ACR) and the Climate Action Reserve (CAR) provide platforms for registering projects and managing credits.
Market and Sell Credits: With verified and registered credits, organizations can market and sell them on carbon markets. Buyers may include companies looking to offset their emissions, investors interested in supporting green projects, or individuals seeking to reduce their carbon footprints.

Implementing Carbon Credit Verification

To sell carbon credits, projects must undergo a rigorous verification process. Jennifer Louie, Executive Director at Nexus for Development, explains, “Our team understands the carbon credit market, specifically the voluntary markets very well, so when we go through the eligibility process, we also determine from an economics perspective if it makes sense for the project to pursue carbon finance. There are relatively high upfront costs related to the registration process.”

Using TaroWorks to Manage Carbon Credit Programs

Technology plays a crucial role in managing carbon credit programs. TaroWorks mobile technology and its integration to Salesforce, provides tools to help organizations streamline carbon-related data collection and management processes. Julie Brown, Director of Operations & Finance at Impact Water, notes, “Impact Water uses TaroWorks to collect information on every school and water purification system, including unique serial numbers and installation dates. This data is crucial for tracking and verification purposes.”

Streamlining Data Collection and Analysis

Data collection and analysis are critical for carbon credit verification. Stevan Simich, Founder & CEO of Mogli Technologies, emphasizes the importance of efficient data management, “One of our clients used to take three months of preparation in Excel spreadsheets, and we were able to drop that down to just a couple of weeks with TaroWorks. This significant time savings allows staff to focus on other essential tasks.”

TaroWorks’ mobile technology enables organizations to collect data in the field, even in offline scenarios, and sync it to the cloud for analysis. “Our field staff can quickly organize data for verification periods, ensuring that we stay ahead of our programs,” says Simich. And, Salesforce is the backend part of TaroWorks, where data can be analyzed and shared.

Generating Revenue from Carbon Credits

For many projects supported by Nexus for Development, carbon credits provide supplementary revenue streams. Companies manufacturing or delivering products like household water filters or improved cookstoves benefit significantly from carbon credit sales. Some projects have generated $3 million to $5 million in sales revenue from carbon credits over a few years, enabling them to scale their impactful programs.

In Kenya and Nigeria, most of Impact Water’s systems are completely subsidized through carbon credits. In Uganda, however, the systems are primarily sold commercially. This blended model allows the organization to expand its impact by providing subsidized water purification systems to schools.

Ensuring Offset Acceptance and Marketability

Nexus for Development provides technical assistance through the different stages of carbon credit projects, working alongside certification organizations and ensuring the project owners are well integrated into the process. This involves a significant investment of time, capital, and human resources.

Jennifer Louie highlights the importance of having the right data, “People collect data required by the Gold Standard certification process or by standard-setting and certification groups in specific geographies. Understanding the project’s sustainable development contribution and its ability to scale by looking at sales forecasts and other projections is essential.”

Technology and Process for Success

Success in managing carbon credit programs depends on understanding the organization’s goals, having leadership committed to the system, and using appropriate technology. This might include simple tools like pen and paper for data collection, with the information quickly integrated into scalable systems. Many projects use smartphone apps for data collection, which makes analysis easier.

Jennifer Louie explains, “Some projects still rely on pen and paper, but having the ability to analyze data efficiently is crucial. TaroWorks and Salesforce allow us to download and analyze data collected through smartphone apps, facilitating a much more efficient process.”

Justifying Technology Costs

Technology can dramatically reduce the time and effort needed for carbon calculations. “There comes a breaking point with the amount of staff effort required just for the carbon calculations during the verification period,” says Simich. By investing in a digital solution, your organization can enhance its efficiency and unlock new opportunities for growth and sustainability.

By investing in the right technology and processes, nonprofits and social enterprises can effectively manage and benefit from selling carbon credits, turning carbon offsets into a viable revenue stream to support their impactful work. Using tools like TaroWorks for data collection and analysis ensures efficient management and verification, ultimately helping organizations maximize their impact and achieve their goals.

To successfully set up and run carbon credit programs, it’s important to invest significantly in people, processes, and systems. Begin with some upfront work, either through a partner or directly with other organizations. This will help you understand both the value of the carbon credits and the payoff period for your investment. Doing so ensures you have a clear picture of the program’s financial viability and long-term benefits.

How TaroWorks Can Help

TaroWorks is dedicated to helping organizations navigate the complexities of carbon credit programs. Our comprehensive suite of tools and consultancy services streamlines the entire process, from data collection and management to verification and market integration. By leveraging TaroWorks’ technology, your organization can ensure accurate, real-time carbon-related data management, enabling you to maximize the financial and environmental benefits of carbon credits. Let TaroWorks be your partner in achieving sustainable growth and making a meaningful impact in communities worldwide.

If you want to learn more about how to successfully keep track of your carbon credits data, and hear real examples from our clients and partners, you can watch the full webinar:

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