Earlier this year, Disney, Shell, Gucci and several other big companies discovered that they had purchased carbon credits that were essentially worthless. A collaborative investigation alleged that Verra, the world’s largest issuer of voluntary carbon credits, had sold credits for forests that were not at risk of destruction, essentially wiping out the value of the credits. Fallout ensued. In the months that followed, Verra’s CEO resigned and the organization rewrote its verification methodology.
This wasn’t the first time that high-profile voluntary carbon credits had been called into question, and it’s unlikely to be the last.
Characterizing a forest is hard work. To get a truly accurate assessment, foresters have to walk through the landscape, measuring trees the old fashioned way. It takes so much time and labor that too much timber cruising would increase the price of any associated carbon credit beyond what the market can bear.
While there are many different types of offsets, forests are a favored option in many cases. Stopping deforestation is relatively cheap and sounds good in marketing copy. For many companies, it’s a win-win.
Verra and numerous other certification organizations have arisen over the last couple decades in an attempt to bring order to the sprawling and often unruly world of carbon credits, doing the hard work of verifying them for their customers.
What the Verra scandal illustrated, though, was that while certifications are helpful, companies should probably be performing their own due diligence, much like investors do when deciding where to place their money.
Using AI to analyze forests
That parallel was on the top of Jonathan Horn’s mind when he founded Treefera last year. Horn had been an investment banker at Citi when the 2008 financial crisis hit, and the rating agencies’ role in the crash left an impression. S&P, for example, awarded Lehman Brothers an A rating just days before the firm’s collapse. “A lot of the problem that we had in the crash was related to the reliability of the data that was underpinning the actual asset,” he told TechCrunch+.
For a carbon credit to be valuable, buyers need to be confident in the amount of carbon the forests’ trees contain and how much more they’re likely to sequester in the future. Organizations like Verra offered a simple way to do that, though the scandal exposed some cracks in the system. Horn and his co-founder Caroline Grey hope Treefera can fill in some of them.