4 reasons why next-generation credits are redefining nature-based carbon markets

There are fewer than 40 months until 2030, a critical milestone for countries' current targets under the Paris Climate Agreement. According to a new report from the United Nations Environment Programme (UNEP), it is still possible to achieve the climate goals set out in the agreement, despite the world being on course to exceed the 1.5°C temperature threshold within the next few years. Achieving those goals requires both meaningful emissions reductions and removing carbon already in the atmosphere.

Fortunately, we have the solutions at the ready. Nature is the world’s original carbon removal “technology”, offering a proven, near-term pathway for sequestering meaningful volumes of carbon. Forests, wetlands and oceans have been absorbing over half of all human-made carbon emissions each year, and with the right investment, nature-based solutions could remove an additional six gigatonnes of CO2 per year by 2050.

Nature-based carbon removal is complementary to other pathways, such as engineered solutions and superpollutant elimination – delivering high-integrity removal now while the other levers scale. We’re already seeing verified deliveries of next-generation carbon credits generated by rebuilding degraded ecosystems and quantifying the carbon removed as they regrow.

Mombak restores degraded pastureland in the Brazilian Amazon through large-scale reforestation with native species. In August, it announced the first delivery of carbon removal credits from its Amazon restoration projects to buyers more than two years ahead of schedule, including members of the Symbiosis Coalition, a buyers' coalition that aims to grow the market for next-generation nature-based carbon removal.

The nature-based carbon market has matured dramatically over the past five years and is
starting to deliver results. Unfortunately, public perceptions of nature-based carbon markets have largely not kept pace. Despite meaningful progress, many businesses, policy-makers and institutions have anchored their perception of nature-based carbon removal to a market of the past.To use all the tools at our disposal to minimize peak warming, we need to reset our perception of nature-based carbon markets.

Forward-looking buyers, policy-makers, scientists and investors know that the nature-based carbon market of today looks very different from the market of five years ago. They’re acting accordingly.

This is how next-generation nature-based carbon removal credits have evolved:

1. Rigour and conservatism: The new generation of projects uses the latest science and data to inform conservative carbon accounting and dynamic baselines, and they mitigate against leakage – the risk that protecting one area just shifts the harmful activity elsewhere. Together, these approaches provide much higher certainty of real climate impact.

Dynamic baselines, for example, draw inspiration from the logic of randomized control trials, measuring a project’s impact against what would have happened without the intervention. Previously, this baseline was measured once at the beginning of the project and never revisited, but dynamic baselines are reassessed each time credits are issued to reflect the conditions on the ground and minimize the risk of overcrediting. Dynamic baselines are increasingly the standard among leading buyers, including the Symbiosis Coalition.

2. Durability: The new generation of nature-based projects is designed with durability in mind from the start, mitigating the risk that the carbon credited and removed is later released back into the atmosphere, which limited confidence in earlier projects. These tools include fire monitoring and management plans in wildfire-prone areas, or benefit-
sharing plans and projects designed with multiple revenue streams that give community
members an incentive to maintain the project beyond the carbon income.

New contractual approaches also manage this risk: permanence trusts or contractually
replacing shorter-durability removal with permanent removal when reversal
monitoring ends. Each approach replaces credits as needed, maintaining the climate
benefit. Forward-looking policy decisions could help to cement these new approaches
onto the global stage.

3. Financing: Taking inspiration from the Power Purchase Agreements that helped scale the renewable energy sector, carbon removal offtake agreements are translating an emerging asset class into a familiar framework that buyers can use to make procurement decisions. These long-term contracts lock in the price and demand that project developers need to help unlock outside investment to scale their projects, further catalysing the market. Third-party instruments that were key to scaling other markets, such as insurance, are increasingly available to support risk management across buyers, developers and investors.

4. Tech: Advances in AI and geospatial data are giving buyers a greater level of confidence in project design, quantification, measurement and monitoring and verification that was not previously possible. For example, Sylvera recently announced the Open Carbon Data Project, a first-of-its-kind initiative to generate a high-resolution, open-access forest carbon dataset across the Brazilian Atlantic Forest.

Supported by The Rockefeller Foundation, Meta, World Resources Institute, Symbiosis Coalition and leading Brazilian research institution UESC, the project aims to increase the amount of trusted, scientifically rigorous data available to underpin credible measurement, reporting and verification at scale. And it’s not just carbon. Tech and AI can enable a more holistic understanding of the impacts of these projects. For example, Mombak is using Google DeepMind’s PerchAI to quantify the biodiversity benefits of reforestation.

These advancements in the market, combined with a rigorous diligence process to assess project quality, ability to scale and commercial readiness can give buyers confidence that nature-based carbon removal can deliver measurable results.

Nature-based carbon removal can credibly contribute to our climate goals; however, the window to capitalize on the near-term value of nature is narrowing.

Developers are making decisions today about planting and scaling that will determine whether the supply of carbon credits is available in time for 2030 and 2050 net-zero commitments.

Buyers are deciding whether to pursue long-term offtake agreements, which give developers the certainty they need to make those decisions and scale the supply.

And policy-makers are writing the rules for carbon removal right now (UN Article 6.4, EU CRCF, EU ETS, EU 2040 climate targets), which will shape how buyers, investors, developers, and the world respond. It’s critical that buyers and policy-makers avoid anchoring these key decisions to a market of the past.

Carbon removal could help the world meaningfully and credibly deliver on climate goals, but not without nature. Now we need policy-makers to create the right conditions to allow it to scale, and for more private actors to fund this vital part of climate action.