None of the program-administered screens for additionality are perfect. Some key questions to avoid credits from lower quality projects include the following:
- Did the project secure a buyer for carbon credits before implementation? Given the risks and uncertainties of the carbon market, it is very rare for a project that truly needs carbon credit revenue to go forward without first securing buyers for most or all of the credits it expects to produce. Forward contracts generally take the form of “emission reduction purchase agreements” (ERPAs). If a project began implementation without an ERPA, its claims to additionality should be further examined.
- How large is the project’s carbon credit revenue stream compared to other revenue streams or cost savings achieved by the project? Claims of additionality are often tenuous if carbon credit revenues constitute a small portion of a project’s total For example, if 95% of the total revenues for a renewable energy project derive from electricity sales and only 5% are from carbon credit revenue, the project’s additionality should be questioned.
- Would the project cease to avoid emissions (or cease to remove GHGs from the atmosphere) if it did not continue to receive carbon credit revenues? Even if a project’s carbon credit revenue is comparable to (or greater than) other revenue streams, those other revenues may be sufficient to cover costs – meaning that the project may continue avoiding emissions (or removing GHGs) even if it stopped selling carbon While such projects are not necessarily non-additional — the decision to implement the project, for example, may still have been based on the prospect of carbon credit sales – they may pose a higher risk of being non-additional.
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Sometimes GHG reduction activities are required by law. Landfill operators in California, for instance, are required to install equipment that captures and destroys methane.
Photo source: Panaramka/ Bigstockphoto.comIf the project is not (currently) legally required, is there reason to believe that it is being undertaken in anticipation of future legal requirements (or to avoid triggering such requirements in the future)? Programs may differ in the extent to which they examine prospective legal requirements. For example, a landfill gas flaring project may not be required by law, but landfill owners may seek to implement such a project if they anticipate being mandated to control landfill emissions in the future (e.g., as the landfill grows to where it exceeds a regulatory size threshold). Thus, they could claim that the project is additional today, even though its implementation would be mandated in the (near) future.