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Commons Offset Portfolio Update: Q2 2023

Since April 2021, the Commons community has purchased over 61,129 tons of carbon. That's an impact equivalent to taking 13,603 cars off the road. You can watch the live update from our CEO and founder Sanchali Pal, along with Carbon Strategy Manager, Sophie Janaskie. Plus read below to get more info about each partner in our portfolio.

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Carbon markets update

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1. Buyers and sellers are recognizing the need for more standardization in Measurement, Reporting & Verification (MRV) approaches for carbon offsetting.

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The market for carbon offset credits still lacks regulation and standardization. Offset projects can be poorly measured, tracked, and verified, drastically overestimating their impact. When offsets are abused as a license to pollute, people in vulnerable communities are most at risk. Recent research by the Guardian showed that as many as 90% of forestry offset projects may be having less impact than expected. In response, Verra updated its own standards and committed to changing how it evaluates all projects by 2025.

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That’s why Commons uses rigorous criteria and conducts our own research above and beyond third party standards. In our 2022 procurement process, we evaluated 24 offset projects, but only selected 6 for inclusion in the Commons Offset Portfolio.

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Given the continued evolution of standards, Commons is continuing to do our own evaluation and monitoring of our offset projects.

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2. Using Web3 to tokenize offsets was all the rage. But many believe its early applications to carbon markets actually caused more problems than it solved.

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Tokenized carbon credits had a big moment in 2022. Web3 enthusiasts saw an opportunity to integrate carbon offsets and web3 technologies, citing transparency, enforceability, and greater liquidity as key benefits of tokenization.

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However, many of the underlying problems in carbon markets stem from the lack of standardization in credit quality. In some cases, the tokenization of carbon credits actually exacerbated these underlying issues. If you’re curious about this topic, we’d highly recommend CarbonPlan’s article, Zombies on the Blockchain.

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3. There’s a growing consensus among rigorous offset buyers that we should treat offsets like stocks: without a guaranteed return. Building a diversified offset portfolio is becoming the standard of quality.

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At Commons, we curate a portfolio of offsets with the greatest potential for impact. You wouldn’t put all your money into one stock, and we don’t invest your full offset into a single project. We curate a portfolio of climate solutions that minimize risk and maximize impact.

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The Oxford Offsetting Principles, published in 2020, provides guidance on how to create an offsetting strategy that supports net-zero by 2050. These principles suggest a portfolio approach that increases its percentage of long-duration removals over time. This has increasingly become the standard of quality for rigorous carbon offset buyers. Leading corporate buyers like Stripe, Shopify, and Microsoft use this approach, and third-party carbon accounting firms are embracing this approach to maximize impact.

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Commons Offset Portfolio Updates

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On a regular basis, our team monitors and evaluates our carbon providers to ensure we are sourcing the best offsets on the market for the Commons community. In this quarterly update, we review the latest updates from our carbon providers.

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NCX Updates

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Based on our Q2 evaluation, Commons is removing NCX forestry credits from the Commons Offset Portfolio and replacing them with higher-confidence credits. There will be no change in price for our customers.

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NCX pays landowners to not cut down trees, with the goal of increasing old-growth forests which absorb more carbon emissions.

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NCX built its innovative project structure to crowd in participation from landowners of all sizes in carbon markets, which maximizes the near-term climate impact of their projects. We included them in our portfolio because of the truly additional nature of their work – they pay landowners directly to not cut down their trees.

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One unique aspect of their program is how permanence, or magnitude and duration of climate impact, is defined (more here). However, their methodology is still novel, and their approach to permanence has not yet been accepted by third-party certifiers, including Verra, as initially hoped.

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In close coordination with NCX, Commons has made the decision to replace NCX credits in our customer portfolios with credits that fulfill the traditional definitions of permanence as defined by rigorous third-party evaluations.

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We will be replacing your NCX credits with a blend of Pachama and Charm Industrial credits. This will provide you, our customers, access to the same number of credits, with greater permanence and confidence, for the same price. Both replacement projects have been vetted by our team.

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We are excited about the innovative work that NCX has done, but the measurement, reporting, and verification methodologies in innovative areas of carbon crediting are still in flux.

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For our community, we’re committed to providing carbon credit products that can be applied more confidently as an offset against your carbon footprint.

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Pachama Updates

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We believe a few Pachama projects are performing below expectations. We are exploring solutions to resolve this.

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Pachama verifies and monitors carbon offset projects using satellite imagery and machine learning. Read more about Pachama.