Title: The Carbon Project Development Curve

Language: English

Type: Blog/Article

Nature: Website

Published: March 17, 2023


Region: Global

Country: Global / Non-Specific

Topic: Emission Reduction Program

Keywords: Emission Reduction Program

Document Link(s):


Document Summary:

Carbon markets are booming, predominantly driven by expectations that carbon offsetting demand from corporate buyers is set to increase as a result of corporate net zero commitments.


Document Details:

Three main carbon project development phases exist:

  • Project Design & Implementation: carbon project developers often use small equity investments or grants to finance carbon project feasibility studies. Early stage development involves taking a binary risk in assessing carbon potential of projects, with high uncertainty of carbon outcomes generated from the project. Project scale potential, strong project development experience, particularly the developer’s carbon delivery track record over time, and strong investor backing work as de-risking factors from a carbon project development standpoint.
  • Project Validation & Verification: carbon project developers can de-risk their projects significantly as they get closer to the first carbon verification event, working with validators for the first time to assess eligibility of carbon projects under specific carbon methodologies and protocols. The carbon delivery risk drops substantially once the project has been verified and approved by a carbon standard. with more predictable carbon outcomes validated over the lifetime of the project. However, the project may still be subject to implementation and delivery risks, for example, if the project is subject to extreme climatic events and carbon volumes end up being lower than anticipated.
  • Project Operations: As the project continues its carbon operations, it monitors and reports upon its activities by verifying and issuing verified carbon units. At this point, earlier implementation risk is reduced, and to a lesser extent, the project is still subject to risks of carbon delivery underperformance. The risk buffer, typically around 10-20% of the overall net GHG emission reductions, acts as an insurance buffer in the event of reversal events. However the project may be still exposed to extreme climatic risks, which lead to underperformance beyond the risk buffer reserve. Regulatory risks are also significant, particularly in the context of changes which arise as a result of the project needing to require corresponding adjustments under the new Article 6 jurisdictional framework.


Updated: January 11, 2024

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