Challenges in Developing Carbon Projects

Over the past weeks and months, I've become increasingly convinced that there is a strong linkage between the quality challenges faced by the VCM (which are very well covered by the media) and the ways in which VCM projects are financed and paid for (which is less well covered). We at the American Forest Foundation just published a blog post which examines this further (link in the comments). Key points: 1) Low carbon prices and the lack of good finance options will push developers to aggressive choices in carbon accounting to make their projects viable. (As an aside, I would love for researchers to dig into whether or not there is a correlation between these elements and overcrediting - my hypothesis is that any such analysis would find a strong correlation). Not "aggressive" does not necessarily mean "wrong." It just means that developers have to bet on a specific, perhaps unlikely version of the future - and when it doesn't turn out that way, it results in over crediting. 2) If buyers don't change the way they are procuring credits, or how much they are willing to pay for them, there is going to be a massive shortage of high-quality credits relative to buyer demand. 3) Buyers need to provide up front capital to developers as part of solving this problem. 4) There are ways to do this that don't expose buyers to excessive risk. We propose an offtake agreement with milestone based prepayments (if someone has a snappy name for this, let me know) as one example. 5) Aside from the benefits to the projects and the atmosphere, buying credits in this way offers huge benefits to buyers: a) it protects them against rapidly increasing carbon prices; b) it helps them achieve a significant discount on a per-tonne basis (because by offering cheaper capital they reduce the projects costs - costs they end up covering whether they prepay or not); c) it enables long-term planning and gets companies out of the year-to-year chaos of spot markets; d) it enables companies to tell a story of how they are leading and catalyzing new projects; e) by getting involved in a project at the very beginning, buyers can learn more about the project and its strengths and weaknesses - helping them mitigate reputational risks. I would love to hear from the community, but especially from buyers: does this make sense? What are the downsides of transacting in this way that we have to account for in further design?

🌍 We often talk about scaling investment into NbS—but what does it actually take? It takes a village. I recently returned from a two-week field mission in Tanzania, where we worked directly with project and community partners advancing their NbS program, on behalf of INTEGRITY GLOBAL PARTNERS INC. Many of the most credible and impactful projects are struggling to access early-stage capital. This “valley of death” exists because there is little to no revenue in the early years—trees take time to grow, and carbon credits take time to issue. While developers often bring deep implementation expertise, they may not speak "finance". As a result, project finance is increasingly skewed toward developers who do—even when they lack meaningful on-the-ground experience or long-term community partnerships. The project we visited underscores this challenge: a complex, multi-component initiative spanning government, communal, and private lands, combining different carbon methodologies across a large and dynamic landscape. It is technically sophisticated, jurisdictionally layered, and logistically demanding—the bumpy dirt roads seem to go on forever! Yet with an incredibly smart and dedicated team behind it, the project holds exceptional potential for climate, biodiversity conservation, and livelihood impacts. To bridge the gap between investor expectations and project realities, we took a deeply collaborative approach: 🔹 Week 1: Field visits to assess risks—technical, financial, regulatory, executional—not by checking boxes, but by working hand-in-hand with partners to identify those risks and practical mitigation strategies. We can do this because we have deep expertise across these multi-disciplines. We were told repeatedly that it was a relief to be able to speak openly about challenges with a partner invested in solving them. 🔹 Week 2: A multi-day capacity-building workshop focused on carbon markets, and carbon and commercial finance. Our goal: equip partners with the knowledge and tools to evaluate options, financial terms, engage confidently with investors, and advocate for fair, aligned partnerships. We co-developed actionable risk mitigation plans so that, when investor conversations begin, the project enters with a credible strategy and a clear, well-supported voice. Yes, this takes time and effort. But if we’re serious about channeling capital into high-impact NbS projects, this is the kind of work that’s needed. We must move beyond transactional models—with investors and projects on either side of the table - and start showing up as true partners. #NatureBasedSolutions #ClimateFinance #CarbonMarkets #CarbonProjects #IGP

The current carbon credit certification process is a major headache for project developers. Accreditation provides a crucial revenue stream that Project Developers depend on to build infrastructure or grow their operations. Whether it's for energy production or carbon removal, developers need to prove their impact through detailed and accurate reporting. However, the current accreditation process fails project developers in 3 major ways: 𝗢𝗽𝗮𝗰𝗶𝘁𝘆 𝗶𝗻 𝗖𝗲𝗿𝘁𝗶𝗳𝗶𝗰𝗮𝘁𝗶𝗼𝗻: Navigating all of the standard bodies and agencies for third-party certifications is incredibly opaque. Even worse, many of these organizations are changing their own standard independently of one another, making it tough for Project Developers to stay compliant. 𝗢𝘂𝘁𝗱𝗮𝘁𝗲𝗱 𝗧𝗼𝗼𝗹𝘀: Many developers still rely on analog methods like Excel and pen-and-paper for tracking and managing their projects. This outdated approach works for the initial stages but becomes a significant barrier as projects scale up. The cost of scaling efficiently is high when relying on such slow, manual processes. 𝗩𝗼𝗹𝘂𝗻𝘁𝗮𝗿𝘆 𝗠𝗮𝗿𝗸𝗲𝘁 𝗖𝗼𝗻𝘀𝘁𝗿𝗮𝗶𝗻𝘁𝘀: The current voluntary carbon credit market lacks stringent requirements for buyers. This means buyers have expectations that far exceed the actual standards set by governing organizations, needlessly inflating the cost of accreditation. In the current carbon accreditation system, success depends on the quality of information shared by project developers. But the level of insight and documentation necessary to achieve carbon credits requires a deep understanding of the procedural, technical, and market aspects of carbon compliance - something that many project developers simply don’t have the time or resources to manage. With such a convoluted process standing in the way of critical funding, project developers need knowledgeable partners to shoulder the burden of proper documentation - so they can get to work making a difference.