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Carbonfuture funding highlights MRV’s role in liberating carbon markets

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Measurement, reporting and verification (MRV) is critical to ensuring the integrity and quality of carbon credits. Successful fundraising by Carbonfuture for its platform by repeat investors highlights the urgency and need for MRV tools and platforms.

  • Carbonfuture raises €5.5 million in funding from existing and new investors.
  • The company provides a digital platform to address MRV which is recognised as a critical need in improving the integrity and transparency of carbon markets.
  • Improving carbon market transparency will help countries fulfilling their NDCs, and the World Bank in assessing ERPAs.

Many countries will need carbon credits to fulfil their carbon reduction goals specified via nationally determined contributions (NDCs). By adding transparency and trust to carbon credits, MRVs can facilitate international trading in carbon markets.

Emission Reductions Payment Agreements (ERPAs) are a mechanism by which the World Bank encourages countries to take action on climate change and sustainability. It has made emission reduction payments in excess of $2 billion over the last two decades through 200 ERPAs in 65 countries. 

The cost of removing carbon is higher than the cost of credits currently, because it also involves removing the carbon generated by the entity purchasing the credit. 

Investors attracted to Carbonfuture’s growth prospects as MRV tool

Carbonfuture is an early stage company that provides companies seeking a carbon removal solution with an end-to-end platform that provides project financing tools, and access to projects via partnerships with carbon removal suppliers. 

Most of the investors involved in its most recent round of funding which raised €5.5 million, were also involved in its seed round funding of $2.8 million in late 2021, citing the platform’s role as a measurement, reporting verification (MRV) tool as a major attraction.

According to the World Bank MRV’s can be an important tool in liberating carbon markets globally and helping achieve climate goals, while also helping reduce the risk of greenwashing.

Carbonfuture claims to offer higher quality credits and has signed up the likes of  Microsoft (NMS:MSFT), Swiss Re (SW:SREN), Klarna, PwC Scale and Milkywire as clients, while partnerships with South Pole and Neustark provide access to projects and credits.

The market for voluntary carbon credits could grow to $50 billion by 2030, according to McKinsey, and further to $100 billion by 2050, per the Institute of International Finance. However, a major constraint to this growth comes from the supply side. 

The difference between carbon credits and carbon removal

Amid the barrage of acronyms, standards and varying sustainability goals being set to combat climate change, the difference between carbon credits and carbon removal is often misunderstood.

The Gold Standard defines a carbon credit as – 

“An emissions unit that is issued by a carbon crediting program and represents an emission reduction or removal of greenhouse gases. Carbon credits are uniquely serialised, issued, tracked, and cancelled by means of an electronic registry”. 

For further clarification, one carbon credit unit represents 1 ton of CO₂ emissions prevented via a carbon mitigation activity, project, or venture, which are selected, verified and approved by standards setting agencies like Gold Standard or Verra.

In some countries where private or independently issued credits are not permitted, like Japan, credits are approved by government entities.

Further, the mitigation activity or project must also prove additionality, meaning the project or activity would not have taken place if the carbon credits were not needed. Assessing the quality credits involves considering the social impact of the activity. 

The price of carbon credits, in turn, depends on the size, location and nature of the project, as well as its quality.

Carbon removal, on the other hand, refers to permanently and sustainably removing and storing carbon dioxide from the atmosphere. Tree planting and carbon sequestration in industrial processes or via direct air capture are well known examples.

Other methods that are gaining in popularity are enhanced weathering, blue carbon (using ocean ecosystems), carbon farming (using agricultural methods) and ocean fertilisation. 

A major challenge confronting the voluntary carbon market (VCM) today is the verification and approval of credits. VCMs will have to scale rapidly to meet the 1.5 to 2 gigatonnes of projected demand for carbon credits by 2030, based on a City of London report.

Whether a project is financed to generate carbon credits, or is focused on removing carbon, the accurate measurement and verification of the removal of every ton of CO2 is of prime importance, which MRVs seek to provide. 

Carbon removal is a more permanent solution to decarbonisation, compared to generating carbon credits, which critics say gives emitters an excuse to delay mitigation. Of course, not generating CO2 emissions in the first place is the most cost effective decarbonisation strategy.

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