February 7, 2020

Selling Carbon Credits: Tech and Financing Fuel Business Growth

Brent Chism

Selling Carbon Credits: Tech and Financing Fuel Business Growth

The market for selling carbon credits is growing with the “volume of transactions in voluntary carbon markets (hitting) a seven-year high in 2018,” according to 2019 research from Forrest Trends, which promotes innovative finance for conservation.

Some forward thinking nonprofits and social enterprises – like TaroWorks’ client water purifier Impact Water and cookstove distributor Proyecto Mirador – generate funding for their operations from carbon offsets their work produces. Before realizing the benefits of selling carbon credits, however, organizations need to develop processes and employ technology to manage carbon credit programs. 

How do you know if this investment will pay off? How should you use mobile and cloud-based technology like TaroWorks to help manage the process of selling carbon credits? We convened a panel from across the carbon credits value chain to discuss what organizations can do using mobile technology to help turn carbon offsets into cash that helps fund their operations.

selling carbon credits
  • Julie Brown, Director, Operations & Finance, Impact Water
  • Jennifer Louie, Executive Director, Nexus for Development, which provides access to finance for clean energy and water solutions in Asia. 
  • Stevan Simich, Founder & CEO, Mogli Technologies, a mobile technology and Salesforce systems builder and integrator that works with Proyecto Mirador.
  • Brent Chism, CEO, TaroWorks, Moderator 

What follows is a summary of the Q&A panel discussion, which has been condensed and edited for clarity. Also, here is the full webinar recording:

Before jumping into the panel discussion summary, you can familiarize yourself with the basics of carbon credits, carbon offsets and selling carbon credits by having a look at this simple overview: How Carbon Credits Work, which answers questions like: What Is a Carbon Credit? How Does The System of Carbon Credits Work? What Is The Relationship Between Carbon Offsets and Carbon Credits?

How Selling Carbon Credits Helps Impact Water

Question: Describe Impact Water’s carbon credit offsets program and how it allows Impact Water to achieve its mission and goals.

Answer:

Julie Brown: Impact Water uses both commercial sales of its water purification systems and carbon credit financing to install such systems in 30,000 schools in Kenya, Uganda and Nigeria – providing safe drinking water to over 15 million children daily. 

In Africa, schools primarily use wood fires to boil water inorder to purify it. The UN has declared that safe drinking water is a human right but boiling is the most readily accessible technology to purify the water. The average school Impact Water works with has 514 students so to boil one liter of water at a minimum per student, per school day is about boiling enough water to fill up a Volkswagen car. 

“Boiling water produces a huge amount of Carbon emission” – which can then be purchased by companies or other organizations to offset carbon emissions their operations create. Impact Water subsequently uses the proceeds from those carbon credit sales to fund its water purification efforts. 


Question: How much of an organization’s business can be subsidized by selling carbon credits?

Answer:

Jennifer Louie: “For the projects we’ve supported its been supplementary or complementary to other revenue streams. So we’re working mainly with companies that are manufacturing or delivering a product, a household product, a household water filter or an improved cookstove so this just complements the sales revenue they’re earning. It allows them to … expand into new markets and that’s really the premise for the work that we are doing.”

“It can be a relatively lucrative endeavor. We’ve had a few very successful projects that over a couple of years were able to generate sales revenue from their carbon credit or carbon offset anywhere from $3 million to $5 million, which has been amazingly helpful of course for them to continue scaling their very meaningful programs and organizations.”

Julie Brown: “For our systems in Kenya and Nigeria most are completely subsidized through carbon credits. But our systems in Uganda have all been primarily sold commercially. ”

“Most countries are working on a budget of about $1 per student per year for the administrative expenses. So to be able to have this blended model where we sell water purification systems to schools and we’re also able to provide some primarily to public primary schools that are completely subsidized by carbon offset credits has really allowed us to expand our impact.”

Carbon Credit Buying, Selling and Tracking

Question: What is the process for selling carbon credits?

Answer:

Jennifer Louie: “Our team understands the carbon credit market, specifically the voluntary markets very well, so when we go through not just the eligibility in the first instance with the project, we’re also trying to determine from an economics perspective if it makes sense for the project to pursue carbon finance because there are some relatively high upfront costs that organizations need to be aware of that are related to the registration process  – so we would provide them color on what we think their credits could be purchased at in the market; when it does get to that issuance stage. This helps these projects to determine whether or not it’s feasible.”

selling carbon credits

Source: Nexus for Development

Stevan Simich: Speaking about Mogli’s work with clean cookstove social enterprise and TaroWorks customer Proyecto Mirador, Simich said Mogli began helping organizations find potential carbon credit buyers through its own networks. It started working with individual funders but over time switched to working with corporations to be able to source funding for their carbon offsets. “One of their most well-known offset partners is Salesforce. They actually offset the last portion of their server carbon for all their server systems that they run. They offset that over (the Proyecto Mirador) project in Honduras.”

Brent Chism: “One of the takeaways is that these programs take a lot of investment to set up and run and that’s both in terms of people, processes and systems. So doing some upfront work…either through a partner or directly with other organizations, is really important to ensure that you both have an understanding of how much the carbon credits will be worth and what the payoff period (will be) for the investment you will make…”


Question: How do organizations using offsets make sure those offsets are accepted by investors and how do they bring those to market for investors to find?

Answer:

Jennifer Louie: The Nexus for Development team provides the technical assistance these projects require to go through the different stages – from prescreening and screening to design and then works alongside certification organizations so they are aware of the projects and the sustainable development contributions. 

“And then we work with different parties at the validation stage including external partners but I think what’s also important to note is that the project owner and developer are very well integrated into the process. It does require time, so an investment of time, capital and human resources.”


Question: What types of data should be collected and analyzed to make it easier to get through the various verification and certification bodies involved in selling carbon credits?

Answer:

Background: Part of the carbon credit and carbon offset process requires independent verification of the amount of CO2 emitted as well as accounting for and setting standards related to the resulting carbon credits and offsets. Here’s an overview of that process – Accounting for and Verifying CO2 Reductions – which includes mention of several particular standards and accounting methods available for use.

Julie Brown: Those metrics are defined before the project even starts. Some questions that would be asked of any project for example include who is the end user but other details are the installation date – needed to determine how long the technology has been offsetting carbon emissions. 

Impact Water is collecting information on every school and every water purification system, which has to have a unique serial number, entered into their Salesforce CRM for tracking. Each school has a unique ID number and must present a carbon waiver signed by a school administrator. The water purification unit installation date is required as well as records of maintenance and repair. This and other information becomes part of a paper trail and is also stored in Salesforce, which makes up the database that is assessed by auditors.

Jennifer Louie: People collect data either required by the Gold Standard certification process, which is a world-wide standard, or capture information required by standard setting and certification groups in specific geographies. There’s a need to understand what the sustainable development contribution is for the project and its ability to scale by looking at sales forecasts and other projections.  

“If they are unable to sell a certain number of units, it’s hard for them to get to that level where they are essentially reducing emissions per year by a threshold [that we deem to be a minimum requirement to make pursuing carbon credit issuance a viable activity].” 


Image: Proyecto Mirador technician photographs newly installed clean cookstove chimney. Source: Mogli Technologies

What Processes and Technologies Help Carbon Credit Financing Work?

Question: What is needed in terms of both technology and process to make a carbon credit program successful?

Answer:  

Stevan Simich:  “There’s more of a process around understanding what does success look like for that organization. This is a simple question that we always start with.  What does success look like if a system is in place.” Answers include “we need our teams to be more efficient or we need to be able to quickly organize that data for a verification period that comes up during a certain point in the year or our field staff is in so much pain because of the offline scenarios they find themselves in.”

“We’ve seen over and over again organizations succeed or fail with systems by kind of a simple concept –  is the leadership really bought into using those systems. If their leadership is committed to it they obviously need to approve the funding for it. They need to influence the staff members that are going to sort of guide and define and ultimately use those systems.” 

“…if you put really good and what we call ‘appropriate technology’ in the hands of staff and employees that helps them do their job, then those systems will be adopted more successfully. And that may not be a smartphone in some cases, it may be a very old proven piece of technology, which is pen and paper. How you get that information from pen and paper quickly into a scalable system, that’s also a piece of the strategy. ”


Question: How does an organization decide on the technology tools to use?

Answer: 

Jennifer Louie: Some projects collect data for their surveys through smartphone apps and then upload data to the cloud (which is what TaroWorks and Salesforce allow organizations like Impact Water and other social enterprises to do). That process  “… is much easier for us since we can download it and analyze it for the results”

“There are some projects that are still relying on pen and paper” and Excel. “As a partner having the ability to analyze that data when it is collected… facilitates a much more efficient process for us.”


Image: John Baptist of Impact Water discussing maintenance check-up with the administrator of Early Years Nursery and Daycare Centre in Kampala, Uganda. Source: TaroWorks

Question: How do you justify the cost of deploying technology to help manage carbon credit programs?

Answer:

Stevan Simich:  “There comes a breaking point of the amount of staff effort to do just simply the carbon calculations for verification period. 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 of very light review and preparation. That was a significant time savings for staff as well as probably the biggest one was just the stress of getting that information ready.”

“At the end of the week, the month, the year when you have to roll up data potentially across multiple countries, having access to that data real-time allows you to stay ahead of your programs versus getting to the end of the year and doing the hard work in Excel and finding that you may have missed a goal.” This flexibility allows an organization  to make “mid-moment refinements, tweaks, changes so it’s not so much a reactionary system but a system that helps them to stay progressive and ahead and nimble in competitive carbon markets.“


Related Resources:



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About the author...

Brent Chism

Brent Chism

CEO

Brent is a market development “triathlete” with expertise in business development, strategic partnerships, and new product development. TaroWorks is Brent’s third technology startup. Prior to TaroWorks, Brent led African and global market development for Kopo Kopo, a Kenya-based mobile merchant payments innovator. Brent has an MBA from the Wharton School and a BA from Stanford University. Brent is based in the San Francisco Bay Area.

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