Anil Madhavapeddy

Disentangling carbon credits and offsets with contributions / Feb 2025

The terms carbon credits and carbon offsets are often used interchangeably, but are in fact two distinct concepts. I've spent a nice Sunday morning reading up on some recent articles that Bhaskar Vira sent me which introduce a third term, known as "carbon contributions". Rather than this adding confusion, I found it helped me clarify my own thoughts on the matter, which I note down here in draft form. (Update 7th Feb: I've revised this several times after many discussions this week, especially with David Coomes and Srinivasan Keshav, with full list of credits in the end)

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Position paper on scientifically credible carbon credits (via 4C) / Jan 2025

My colleagues Thomas Swinfield and Eleanor Toye Scott lead the publication of a comprehensive report of the steps the voluntary carbon market needs to take to restore its scientific credibility, with input from many of us in 4C and beyond.

• establishing common standards for carbon quantification and accounting, to cover additionality, leakage and permanence.
• avoiding perverse incentives and align the motivations of all stakeholders with high-integrity outcomes. [...]
• issuing all carbon credits based on trusted primary observations.
• making all the data needed to reproduce carbon calculations available in standard file formats.
• [...] reporting social and biodiversity dimensions of projects separately from carbon calculations.
• integrating DMRV methods into carbon and biodiversity accounting standards to reduce the financial and administrative burdens on nature-based projects and the local communities participating in or affected by them.

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Published a legal perspective on high integrity forest carbon credits / Nov 2024

Sophie Chapman lead an effort to explore a novel legal framework for forest carbon credits that separates carbon tenure (i.e. title and associated property rights to the land and trees which store the carbon) from the carbon rights (i.e. title and associated rights to monetise and manage the credits which symbolically represent the carbon stored in the trees), while also specifying the relationship between the carbon tenure and the carbon rights.

The resulting paper has just been published in the Climate and Carbon Law Review journal, and is available as open access for your perusal.

Mitigating credit reversal risks in nature-based solutions / Sep 2024

Many of the questions around our recent Nature Sustainability commentary on NbS credits revolve around how to finance new projects if credible credits need to be ex-post. Our latest paper published in Carbon Management on "Mitigating risk of credit reversal in nature-based climate solutions by optimally anticipating carbon release" tries to address this.

The problem with selling ex-ante (future) carbon credits for (e.g.) a deforestation avoidance scheme is that project reversals can happen in the future ("deforestation has increased") thus rendering any credits issued previously useless. On the flip side though, an overly conservative view of the future ("the entire forest will disappear overnight!") is clearly so conservative that it doesn't serve the best interests of the project developer. So ideally, a project would make realistic but conservative ex-ante predictions that is safe for both project developer (who gets more funds upfront) and a carbon credit purchasers (who needs to account for impermanence of nature credits).

Our paper shows how to do this by calculating a "release schedule" to predict future drawdowns, and then issuing extra credits when the release at some future date is less than predicted by the release schedule. We use verified ex-post observations to construct these release schedules, and design them to bound the risk of the project becoming negative overall (that is, net drawdown is negative) and thus failing.

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Paper published on ex-ante forecasts of nature-based solutions / Aug 2024

Our paper on ex-ante projection for nature-based solutions has been published in the Journal of Carbon Management. I also wrote up some long-form thoughts on it here. The publication represents the culmination of work on how to properly account for credit reversal risk in nature-based climate solutions through optimal carbon release anticipation. E-Ping did excellent work leading the methodology development and analysis. The approach we developed incentivizes project performance while resolving the fundamental trade-off between a credit's permanence rating and risk reduction, providing a pragmatic solution to one of the key challenges facing the effectiveness of nature-based climate solutions.

PACT Tropical Moist Forest Accreditation Methodology / Aug 2024

We have just released the Tropical Moist Forest v2.1 specification, to follow up the now-expired v2.0 from six months ago. The key updates are a new high-level explainer, as well as clarifications for buffer zones and base tiles. The high-level explainer is particularly useful as it makes the methodology more accessible to a broader audience beyond just technical specialists. We've also refined the technical details around how to handle edge cases with buffer zones and base tiles in the remote sensing data, which came from feedback from teams trying to implement the methodology. These incremental improvements are important for ensuring the specification can be reliably applied in practice.

Nature Sustainability commentary on carbon and biodiversity credits / Aug 2024

Our commentary on nature-based credits has been published in Nature Sustainability, lead expertly by my colleagues Thomas Swinfield and Sophus zu Ermgassen.

In our view the carbon credits markets are vitally important for forest conservation, but the key is to only transact these credits after they have been proven to be demonstrably additional using robust statistical techniques, so that we know before a sale that each credit represents real gains that would not otherwise have occurred without the carbon finance.

A more scientific approach that supports transparent, third-party validation could absolutely transform these markets. And given the rapid rate of tropical forest loss, such upscaling of credibility is vitally necessary to raise investor confidence in protecting nature, since we can now be confident that every "credit" sold is resulting in real climate benefit. There are real questions remaining about this reform, of course.

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Nature Sustainability article on carbon/biodiversity credits / Aug 2024

Our commentary on nature-based credits has been published in Nature Sustainability. I wrote some thoughts about it here as well. This piece argues that nature-based credit markets are at a critical crossroads - recent impact evaluations showing disappointing results have threatened investor confidence. We make the case that these markets need fundamental reform to adopt the latest scientific understanding on additionality, leakage, and permanence. The key proposal is releasing credits ex-post only after proven demonstrable additionality relative to statistically-derived counterfactuals, and making credit estimation methods robust to rather than resistant to scientific improvements. Without these reforms, we risk losing one of our most promising tools for drawing private investment into conservation.

Preprint available on insuring against variability of NbS / Mar 2024

A new preprint is available on our work on ex-ante pricing models for nature-based solutions. It is currently under review, so any feedback is most welcome! This paper tackles the challenge of variability in the performance of nature-based climate solutions by developing optimal release schedules that balance generating credits with higher permanence ratings against limiting the risk of negative additionality. We use Monte Carlo simulations on both theoretical and real-life projects to show how conservatively anticipating carbon release and issuing additional credits when reality is less pessimistic than projections can provide pragmatic insurance against the inherent uncertainty in these systems.

PACT Tropical Moist Forest Accreditation Methodology / Dec 2023

We have just released the Tropical Moist Forest v2.0 specification, to update the v1.1 released earlier in the year. There are significant updates to the methodology to better match the scheme described in Realizing the social value of impermanent carbon credits. This revision integrates the permanence valuation framework from our Nature Climate Change paper into the operational methodology. It represents an important evolution as we refined our approach based on both peer review feedback and early implementation experiences. The updates ensure that the practical specification aligns with the theoretical foundation we published, creating a more coherent and scientifically robust system for evaluating forest carbon projects.

Preprint on the social value of impermanent carbon credits / Jul 2023

We have uploaded a preprint of our 4C paper on valuing impermanent carbon credits, by using the Social Cost of Carbon as a basis for a discount function into the future. Comments and feedback are most welcome. This work tackles one of the biggest challenges in nature-based climate solutions: how to value carbon sequestration that might not be permanent. We developed a novel framework that conceptualizes permanence as additionality over time relative to a counterfactual baseline, uses risk-averse estimation of future carbon release, and deploys post-credit monitoring to correct for overly pessimistic forecasts. Our preliminary comparisons suggest that even after fully adjusting for impermanence, nature-based interventions may offer less costly ways of reducing climate damages than more technological solutions.

PACT Tropical Moist Forest Accreditation Methodology / Jun 2023

We have just published the Tropical Moist Forest v1.0 specification, which is a detailed description of the methodology we are using for counterfactual dynamic baselines to calculate the additionality, leakage and permanence behind REDD+ projects. I explained some of the background behind this in a seminar last year. This specification operationalizes the theoretical framework we developed for the Cambridge Center for Carbon Credits (4C), translating research into a practical methodology that can be applied to real-world forest conservation projects. It's a comprehensive document that lays out how to use satellite data and econometric techniques to establish what would have happened to a forest in the absence of a conservation project, which is crucial for determining whether carbon credits genuinely represent additional climate benefits.

Credit credibility threatens forests / May 2023

Our perspective in Science magazine appeared this week on the credibility of carbon credits and its importance for tropical forest protection. This was a collaborative effort with colleagues from across conservation science, economics, and computer science to address one of the most pressing issues in climate finance. We argue that improving the quantification methods behind carbon credits is not just a technical issue but an existential one for forest protection. If credits don't accurately represent their environmental benefits, the entire voluntary carbon market risks collapse, which would be catastrophic for tropical forests that depend on this financing. The piece calls for robust, scientifically-grounded methodologies to ensure that carbon credits can genuinely contribute to climate mitigation rather than providing false assurance.

Addressing global warming requires increased investment in conserving and restoring carbon-dense natural habitats. Some companies that emit carbon have turned to certified carbon credits to offset their environmental impact. However, the effectiveness of carbon credits depends on the methods used to quantify them. If carbon credits do not accurately represent their environmental benefits, relying on them could exacerbate climate change. To ensure that carbon credits are robust, the methods used to calculate them must be improved.

Launching the Cambridge Centre for Carbon Credits (via Pembroke College) / Nov 2021

I launched 4C recently, and Pembroke College covers the launch with an interview with me.

The world is facing a large-scale environmental crisis. Two parallel and related strands of this are, first, the crisis in biodiversity and the rapid extinction of many species, recently addressed at the COP15 UN Biodiversity Conference in October, and second, the threat of climate change, the topic of last month’s COP26 summit in Glasgow. Pressure is growing on governments to execute nature-based solutions which will offset some of the most damaging impacts of these crises. While COP26 built some momentum, there is still a long way to go to turn promises into lasting change. More engagement with the private sector is urgently needed.

The solution to the crisis is two-pronged: we must engage in behaviour change to reduce unnecessary harmful emissions, and also invest in nature-based solutions at global scales to not only reduce, but ultimately reverse the effects of climate change and biodiversity loss. -- Pembroke College