TIME CO2 Portfolio Criteria: How We Assess Project Quality

Despite efforts to regulate, standardize, and improve the quality of carbon credits, the crisis of trust has intensified around voluntary carbon markets and has thrown into question what high quality truly entails when a climate project claims to mitigate climate change. 

Setting a standard for high quality in a climate project is of paramount importance, to assess which climate projects have verified, sustainable, and positive planetary impact. But quality can be an elusive concept. Whether it's quality of impact, scientific rigor, or risk mitigation, many organizations talk about the concept of quality to discern which climate projects deserve investment, but what does it truly entail?  

Rather than take an extreme and reductive stance that all climate projects generating voluntary carbon credits are poor quality, our team at TIME CO2 is investing our energy and expertise into defining quality for the industry. We have set and continue to strive for a high bar, sharing our learnings for the benefit of everyone who agrees we need to provide solutions, rather than only call out problems with existing mechanisms that facilitate climate action. 

To balance ideals with action, we are transparent about how we define quality, what we evaluate when reviewing projects, and which evidence we consider sufficient to meet our standards. These standards are based on established third-party authorities like the ICVCM’s Core Carbon Principles, the Oxford Principles for Net Zero, the Drawdown Framework, SBTi Net Zero Standard, and IPCC research that grounds everything we do in science and what the planet needs to mitigate climate change. Following those principles naturally leads us beyond the voluntary carbon market with project assessment criteria and portfolio design that both qualifies and integrates outcomes across nature, community, and social impact. 

It is easier to define quality around carbon impact alone, which many carbon brokerages, credit ratings agencies, and climate project marketplaces do.

As these standards evolve, so will our criteria. Drawing from the best available science, advancements in MRV (monitoring, reporting, and verification), and our own learnings, will enable us to continue constructing a clear bar of trusted high-quality climate impact.

Below are the 10 key criteria that we currently evaluate all of our climate projects against to provide a comprehensive view of high quality climate impact:

Carbon Integrity

1. Additionality and over-crediting: a robust determination of the project’s impact on greenhouse gas emissions 

• Carbon additionality - Project demonstrates that carbon reductions achieved are additional to what would have happened if the project had not been carried out, including a comparison to a baseline or “business as usual” scenario, and can be attributed to the specific project activities.

• Financial additionality - TIME CO2 funding is material, if not catalytic (accepting diminished financial expectations in service of greater social or environmental benefit that would catalyze further investment from the market), for the project, creating impact that is over and above what might have happened with existing sources of funding.

• Over-crediting - the risk of attributing more carbon credits to a project relative to pre-project baselines and the chosen crediting methodology.

2. Permanence: refers to the durability of the carbon mitigation impact, e.g. short-lived vs long-lived carbon removal or reduction. TIME CO2 leverages the best available science to assess appropriate and longest durability per project type, aiming for a benchmark of a 100-year duration 

• For carbon removal or reduction projects, permanence refers to the risk of reversal, i.e. the re-release of carbon due to unforeseen circumstances like deforestation or behavioral change, where at any point in the future, the rate of GHG emissions accelerates such that it is higher than what would have occurred if the project or intervention had never happened. 

• For carbon protection projects, permanence refers to the length of time that the natural systems are expected to store carbon, factoring in natural causes for reversal like wildfires.

3. Leakage: refers to the likelihood of an unintended increase in, or shifting of greenhouse gas emissions from one jurisdiction to another, often due to asymmetrical climate policies. Common examples include:

• When a company moves their operations from one country with stringent carbon pricing, to another country with lenient climate policy and no carbon pricing regulation.

• When an organization sets up a protected area to eliminate deforestation in the project area, without addressing the underlying drivers of deforestation. This results in neighboring lands accelerating in deforestation/degradation.

• When an organization develops technologies to improve the productivity of managed farms, forests, and other lands. Without pairing this technology with conservation measures, this development improves the profitability of managed lands and further incentives deforestation. This is also known as the rebound effect.

Co-Benefits

4. Social/Community Co-Benefits: include estimated improvements to quality of life, income generation, job creation/employment, health, gender equality, access to education, or cultural and traditional practices. Empowerment of underrepresented communities through jobs, revenue generation, and benefit-sharing agreements. Anticipated project impacts could also include disaster risk reduction, increased resilience, improved water management, and long-term food security.

5. Nature Co-Benefits: include estimated improvements to biodiversity, ecosystem services, overall ecosystem health, and ecosystem resilience to climate and other impacts. All existing reports, studies, and research related to project outcomes and both positive and negative environmental impacts are reviewed, especially the project's Life Cycle Assessment (LCA) and Environmental Impact Assessment (EIA). 

Project Design & Delivery

6. Project Management and Governance: covers the assessment of institutional arrangements and management of the project outcomes with a preference given to projects that are nationally supported, ecopreneur, or community driven. To the extent possible, projects should show a commitment to consultative processes with local communities, including free, prior, and informed consent (FPIC) and benefit-sharing agreements. 

7. Risk Mitigation: encapsulates an evaluation of risks, including: reversal, governance, technical, social, environmental, financial, and market risks. The evaluation considers the proposed risk mitigation plan and mitigation impact of the project activity based on best available science and cost-effective approach.

8. Cost Effectiveness and Return on Investment (ROI): evaluates how project costs compare both globally and within similar geographies (where data is available) to alternative solutions that achieve the same goals. It also includes an assessment of current pricing, projected cost curves, and volume discounts in relation to anticipated impact. TIME CO2 assesses the project budget to evaluate effectiveness of the funding utilization, e.g. benefit-sharing with local communities as compared to project overhead.

9. Scalability: an understanding of how the project involves, includes, or advances a model or technology that is catalytic and scalable. Dimensions of scalability include, but are not limited to: TAM (total addressable market) of the intervention in question, degree of modularity of the model, project startup time, and potential for systemic change.

• Longevity of Outcomes: how the program design sustains project outcomes (beyond carbon) for the duration of the project and beyond. Strategies include: developing or establishing long-term financing plans, anticipating regulation, bundling with other services, reinvesting in expansion, investing in efficiencies, or developing mechanisms to generate alternative revenue streams.

10. Scientific Integrity & MRV: a sufficient scientific basis on which to justify generating carbon credits, as well as the monitoring and measurement systems in place to ensure that the carbon impact actually occurs. Given that both the science underpinning our understanding of natural and engineered systems, and the means of measuring it, are still evolving, some systems, like mangrove replanting, storing CO2 in underground wells, and reforestation with native tree species are better understood. Other systems, like soil carbon storage in farmland and ocean alkalinity enhancement, are less understood and thus require assessing the latest and best available research findings.  

How do we evaluate innovation?

The large range of projects we consider gives us the opportunity to evaluate a diverse set of innovations, from wave energy to sustainable aviation fuel production, and packaging reuse to seaweed additives. Generally, innovation projects must measurably satisfy at least one of the following criteria to be considered for our portfolios:

• Assists in helping under-served or underrepresented communities meet the conditions necessary to access financing or deploy a climate solution, e.g. piloting nurseries and setting up seed banks to support reforestation

• Advance purchase or commitment for a new product or material that reduces or removes carbon but does not yet have an approved measurement methodology, e.g. advancing a zero-carbon fuel purchase

• Accelerates the speed, improves the accuracy, or reduces cost of MRV efforts, e.g. piloting an in-situ monitoring system to measure soil carbon over time

• Addresses or removes a specific barrier for a new type of technology or methodology to scale

• Accelerates the scaling of a proof of concept of a regenerative, circular, nature-positive, or climate-resilient innovation

These 10 criteria aim to be comprehensive and anchored in the best available science to ensure our selected projects, and ultimately, the impact delivered from our portfolios are of the highest quality. While the prevailing practice for climate investments is to narrowly focus on carbon impact and projects that generate carbon credits, we integrate co-benefits as core decision criteria to advance nature-positive and climate just projects into our portfolios. In addition, evaluating the project management and governance of each project goes beyond typical near-term considerations to ensure that the multidimensional results of the portfolio are delivered sustainably with the ability to scale and potential for catalytic impact. 

See how these 10 criteria form part of our broader due diligence process, here.