interview with Anton Root
“Extra level of transparency and integrity is really required. Otherwise, this whole thing comes falling down.”
Maurice
Hello everybody, welcome to the next edition of C&F Talks. Today I have with me Anton Root, who's the Co-Founder and Head of Research at AlliedOffsets. Anton's going to be joining us to speak at the International Carbon Market Summit, which is being held in London on the 14th of October. Welcome, Anton.
Anton
Thank you for having me.
Maurice
Great to have you with us.
How corporates are reacting to the move towards high integrity credits in VCMs
There's been a lot of debate in the press and elsewhere about the voluntary carbon markets and there being a need to improve the integrity of those markets. And obviously the ICVCM and the VCMI have been working on how to improve the integrity. How are corporates in your experience reacting to the move towards high integrity credits in the VCMs?
Anton
Yeah, thanks for that. That's a great question. Yeah, of course, quality and integrity and trust have been at the very top of the agenda over the last, you know, especially two years, but even prior to that. And really what everybody wants is for these credits to be, you know, a ton of carbon.
That's fundamentally what this is meant to be. And a credit is meant to represent a ton of emissions reduced or removed from the atmosphere. Now, on the corporate side, we're seeing corporates really moving, you know, further upstream.
So they're getting much more involved with investing in projects themselves, partnering with organisations to get really involved in the projects earlier on, and perhaps, you know, securing offtake agreements into the future, rather than relying on existing supply of credits today, which, of course, we've seen, you know, lots of negative stories about. So that's been one of the main ways that corporates have responded. Some have also chosen to source credits from, you know, more novel projects.
So things like direct air capture, or biochar, enhanced rock weathering, etc. Those types of projects and those credits seem to have greater quality and more integrity. But of course, they're much more expensive. So we haven't seen, you know, a huge shift to those credits yet, just given the price. But some corporates certainly have, you know, really doubled down on those credits.
How the market segments based on company size
Maurice
And when we talk about the corporates, are we really talking about the largest companies? How does this market segment? Is it the, I don't know, the Microsoft and the BPs of this world? Or does it go down to a smaller size?
Anton
Yeah, you know, it's really quite varied.
We track about 14,000 companies that are, or that have ever bought credits in this market. And they really range from the biggest sort of emitters that you can think of, the BPs, the Shells, etc. To airline companies, you know, telecom firms, and then, of course, some of the biggest tech firms as well.
But then on the other hand, you know, you have sort of mom-and-pop shops as well. You have some companies offsetting for the emissions of products that they're putting out. And these are, you know, small companies.
So it's really quite varied. And I think that, you know, that kind of broadens the appeal of the market, because it's not just, you know, the large emitters or certain sectors of the economy. It's really corporates that are trying to, you know, do a good thing and trying to offset their emissions. And it really spans the entire gamut of the biggest to the smallest.
How AlliedOffsets business model addresses the lack of standardisation and transparency in the VCM
Maurice
And obviously, with your business model, you know, you're standing between I suppose, the project developers and the corporate buyers. So how do you address the lack of standardisation and transparency in the market through the services that you offer?
Anton
Yeah, so AlliedOffsets, we launched about four years ago now.
And we have a database of over 30,000 projects from 25 different registries, as well as projects that aren't on registries yet. So we really track the entire cycle of, you know, in some cases, investment in projects and project developers, all the way through sort of the registration, the actual activity, so the issuances of the credits by projects as they are undertaking their activity. And then finally, the sort of sale and the retirement of credits, and, you know, price dynamics and everything involved with that.
So, yeah, the market is, you know, I would say there's, in some cases, or in some ways, there's more transparency than what, you know, what people think. I mean, at the end of the day, you can go into the registry pages and find hundreds of pages of documents, you know, around the projects and the verification reports and the auditing activity and everything like that. And, you know, in a lot of ways, that's more transparency than what you would find, you know, in many other sectors of the economy.
But having said that, you know, clearly, given that carbon credits are such an intangible product, and you can't hold one, you can't see one, you know, really, it's just numbers on the screen. You know, I think that extra level of transparency and integrity is really required. Otherwise, this whole thing comes falling down.
Biodiversity as a co-benefit of carbon projects: in practice
Maurice
I read with interest, I think it was on your website, that you recently set out to assess biodiversity as a co-benefit of carbon projects. How does that work in practice?
Anton
Yeah, good question. So, you know, a lot of projects in the nature-based space, you know, they're either looking to, you know, preserve and conserve nature or forests, or restore forests, whether that's, you know, reforestation projects, afforestation, or peatland restoration, mangrove restoration, things like that.
Now, you know, and some of those projects may be doing a lot of great work on the carbon side. So planting trees, and you know, sequestering the carbon, which is necessary for us to avoid the worst potential cases of climate change. But they may not necessarily be, you know, helping from a biodiversity perspective.
Now, that's not necessarily a bad thing. At the end of the day, this is a carbon market. This is, you know, carbon that these projects are meant to sequester. But of course, some projects are doing a better job and they're planting, you know, native trees, or they're just conserving areas of the planet that are more rich from a biodiversity perspective.
So what we're looking to do is essentially highlight the ones that are doing, you know, really good work and that are, you know, that are protecting really, you know, rare species and are in areas that are incredibly rich from a biodiversity perspective. And if you're a buyer in the carbon market today, you know, it's really hard to distinguish which projects are those versus which ones are, you know, perhaps, again, still doing a great job from a carbon perspective, but may not necessarily have that same biodiversity impact.
Maurice
Well, I'm sure that there's huge demand if you can cover both aspects through the credit that you're buying.
VCM and mandatory carbon markets evolving and convergence between the two
Do you share with us your thoughts about how the voluntary carbon markets and the mandatory, the compliance markets are likely to evolve? Do you see that there will be greater convergence between them over time with carbon credits perhaps being used in the voluntary carbon credits being used in the compliance markets and so on? Do you think ultimately that there will be a merging of these markets?
Anton
Yeah, you know, I think that's where the market is certainly heading. So we're seeing lots of different, you know, governments worldwide, either introducing regulation around carbon taxation or emission trading systems, which allow for a certain percentage of the sort of obligation to be met through voluntary credits.
So either that's being introduced or existing schemes are being amended with an eye towards accepting some of those credits. You know, it's already happening in places like California, Colombia, South Korea, South Africa, many others, and places like Taiwan are looking to introduce that type of scheme today as are countries like Singapore. So it's certainly happening.
I think the real question is whether the quality of these projects will be deemed to be high enough to meet the bar that the regulators will want to see. So again, I think it really comes back to can we prove that or can we trust that a ton of carbon is a ton or, you know, even in a case where we say, well, maybe this project overissued credits, but they overissued it by, you know, 50%. So, you just need to buy more credits to account for that. I mean, I think some sort of system like that would bring certainly more accountability and more transparency to the market.
Is a unified carbon price necessary to achieve what everybody wants?
Maurice
And do you think, just final question, looking towards the future, there have been a few leader pieces, the World Trade Organisation, for instance, was talking about the need for carbon pricing, that we see the carbon order adjustment mechanisms that the EU and the UK are introducing. Do you think all of these, ultimately, with the patchwork of systems of the voluntary carbon markets, the compliance markets, a push towards some other forms of carbon pricing, do you think ultimately that holy grail of a unified carbon price will materialise? Or do you think that's simply not necessary to achieve the ends that everybody wants?
Anton
I mean, it's a great question.
You know, I think from my point of view, as someone who is trained to be an economist, certainly I think a carbon price would be a great way to mitigate climate change. Of course, it's not the only option, but I think it's one that is, you know, that is quite feasible. You know, I really hope that we are going to be able to get there.
I think, you know, in the next couple of years, you know, this market hasn't really faced a big downturn. You know, I don't think we've seen really a recession over the last four years when this market really started to sort of take-off once again, sort of as a second wave that we're seeing today. And, you know, I really hope that as, you know, at some point, you know, recessions are inevitable and at some point it will happen.
And I really hope that, you know, companies and governments do not pull back from some of the commitments that they're making today, because, you know, it's easy to cut sustainability initiatives as the first thing you cut, right? And to jettison plans for taxing corporates more when they're already hurting. And that's, of course, understandable, but there's definitely trade-off that can be thought about here. And if we're moving into an era when, you know, pollution is accounted for and polluters must pay, then, you know, we really need a carbon price, whether that's through credits or taxes or some sort of ETS.
We need that to really take hold. Otherwise, you know, there's really no incentive for people to stop polluting.
Maurice
Yeah, I fully agree with that, Anton.
For our viewers, if you'd like to hear more on these issues and related issues, please do come along to the event in person. It's being held in London on the 14th of October, International Carbon Market Summit. I would love to see the further information on our website, cityandfinancial.com. So, do look there and book your ticket.
Anton, thank you very much indeed for sharing those thoughts today.
Anton
Thanks for having me.
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