How to Self-Generate Carbon Credits
Building an Offsets Strategy
26th January 2024
The past few years have seen a rapid increase in organisations transitioning to carbon neutrality. For the vast majority, achieving carbon neutral status requires at least some level of carbon offsetting and building an offsets strategy.
Traditionally, organisations looked to purchase carbon offsets through the various avenues and mechanisms available for buying offsets. However, in the face of the recent soaring price for domestic carbon offsets or ACCUs (Australian Carbon Credit Units), and the inherent uncertainty of availability and prices in the carbon market over the medium to long-term, an increasing number of organisations are now looking to self-generate their own carbon credits via carbon offset projects.
Many seek to do this by developing land-based carbon projects under the Australian government’s Emissions Reduction Fund (ERF). But how do you go about building an offsets strategy, to self-generate carbon credits and what are some of the key factors to consider?
We explore this in a two-part series starting here with six steps on building an offsets strategy focused on land-based projects to self-generate ACCUs.
How the ERF auction works.
Note ERF land-based offset projects must meet strict criteria as outlined under each methodology and scheme. Failure to meet the participation requirements of the scheme renders a site ineligible to generate ACCUs. Bear this in mind when considering if a self-generating offsets strategy is right for your organisation.
6 Steps to Self-Generate Carbon Credits and Build an Offsets Strategy
1. Start With a Robust Emissions Reduction Strategy
The first key step is to build a robust emissions reduction strategy. This is critical in the context of building an offsets strategy, as you need a clear understanding of the amount of carbon dioxide equivalent (tCO2-e) you need to offset and how this might change over time, as your organisational efforts to decrease emissions are implemented.
There might also be some preliminary consideration given at this stage, to the make-up of the offsets portfolio; whether your organisation seeks to rely exclusively on self-generated carbon offsets, or whether a portion of offsets will be purchased through traditional channels
2. Consider Opportunities for Developing Sequestration Projects Under the ERF at a Conceptual Level
Next, your organisation should consider at a conceptual level, which sequestration opportunities are most suitable to your circumstances. At this stage in the process, this will be a preliminary screening and in-principle consideration of a series of factors. Further refinement will be required as you move towards the identification of individual target sites for the development of carbon projects.
A useful starting point is to consider the different types of land-based projects supported by the ERF. These range from revegetation by planting (carbon sequestration projects) through to maintaining existing vegetation (emissions avoidance projects), as well as projects that are focused on working in conjunction with agricultural activities on the land. The ERF’s Soil and vegetation sequestration decision tree can assist in understanding which sequestration methodology is right for your situation.
It’s useful to consider your brand reputation and overarching sustainability strategy here. Some organisations exclude certain types of projects, most commonly emissions avoidance projects, entirely from their strategy based on reputational considerations, or because they are bound by rules that preclude certain types of projects.
3. Consider Other Parameters for Project Suitability
Once any in-principle exclusions are decided upon, the suitability of different project types ultimately depends on an interplay of a series of parameters, including locality, the required level of abatement (i.e. offsets), the preferred delivery (or ownership) model, and any additional co-benefits you’re seeking to achieve.
We’ll explore these in greater detail in Part 2.
4. Identify Target Sites for Self-Generating, Carbon Offsets Project Implementation
Ultimately, your organisation needs to identify and source target sites for your self-generating carbon credits. If you have existing landholdings, then the most obvious starting point is to assess the suitability of that land for project implementation. In the absence of existing landholdings, you might take a view on preferred regions for project implementation. If so, high-level screening of the abatement potential of broader areas through GIS-based methods in light of your pre-selected project types would be the next step, followed by property market analysis to identify any sites available for purchase.
Alternatively, your organisation might leverage existing partnerships to help identify land and landholders to partner with, in seeking to implement a carbon offset project, although this is arguably a more complex implementation pathway.
5. Feasibility and Eligibility Assessment at the Target-Site Level
Each target site will then have to pass through a feasibility and eligibility assessment process.
It is at this point, at the latest, we recommend you seek expert advice. This is critical because failure to meet the participation requirements of the scheme renders a site ineligible to generate ACCUs, and inaccurate forecasting of the site’s potential to generate offsets may skew the economics of a project, resulting in a mismatch of abatement relative to implementation costs.
There is no prescribed way of undertaking these assessments. At Ndevr Environmental, we like to break this task down into a number of discrete stages, with each stage enabling a progressively deeper understanding of the project potential and economics but avoiding unnecessary costs to organisations as they assess individual sites.
Assuming the site passes eligibility and feasibility, your organisation can proceed through to registration of the project with the Clean Energy Regulator. We will take a closer look at the details of this and the assessments under this step in Part 2.
6. Firming up the Offsets Portfolio
Depending on the level of abatement required, the target site analysis may be repeated a number of times to make up a portfolio of projects. For example, to generate 15,000 tCO2-e per year through a plantings project, an organisation would require around 1,000 hectares of high-potential land. This may be difficult to source in one individual site, and high potential land may not be readily available.
Here, it also becomes relevant to consider how a mix of sourcing strategies might assist to generate the required level of offsets in the most cost-effective way.
Think a Self-Generating Carbon Offsets Strategy Might Work for you? Reach out to us for Further Advice
There you have our high-level guideline for six steps on how to self-generate carbon credits and build an offsets strategy. As the price of ACCUs increases and demand for carbon offsets skyrockets due to the rise in corporate carbon neutral commitments, it makes good business sense to get ahead of the curve and explore if a self-generating carbon offsets strategy might work for your organisation.
Reach out to our team for advice on building an offsets strategy or eligibility of a property for implementing a carbon project: email or Call +61 3 7035 1740. If you need advice on a wider climate change or sustainability strategy we can help with that too.