Busting the myth that newer carbon credits are superior

The opinions expressed by Trellis expert contributors are their own, not those of Trellis.

Companies often try to buy relatively new carbon credits, sometimes those no more than five years old. Many also want to match the “credit vintage” – the year the reduction or removal occurred – with the year the emissions being offset were generated. We don’t think this is a sensible strategy. 

Newer does not mean better

Carbon credits are not like an iPhone, where newer models tend to outperform older ones. Older credits can be high or low quality, just as newer credits can be. Credits are designed to represent one metric ton of carbon dioxide reduced or removed from the atmosphere. That’s it. There are no new features or upgrades — it’s either one metric ton, or it’s not.

One reason many people believe “new” is a proxy for “better” is that methodologies for calculating emission reductions improve over time, as do technologies for monitoring the performance of carbon projects. This is true, but on its own it doesn’t ensure that the quality of all credits also improves. 

Methodologies can take a step backward, for instance. This can result in projects that use the same methodology to issue newer vintages with lower quality. There’s a methodology for the destruction of ozone-depleting substances, for example, that was updated to allow more credits to be generated from the same activity — a change that opens up the potential for lower-integrity credits. 

Context also matters. New government subsidies can undermine a project’s claim to additionality, for example. When a project starts, it may need revenue from credit sales to succeed financially; the arrival of subsidies can call that assumption into question. A landfill gas project might need upfront finance to build the infrastructure to capture the emissions. Credit sales can help pay back investors and run the equipment — but the later introduction of government subsidies or other support for the activity could put the need for carbon finance in question for future projects. 

The case for older credits

Many researchers advocate for what’s called the “time value” of carbon: the idea that climate change is driven not just by emissions in a particular year, but by the accumulation of greenhouse gases in the atmosphere. That means credits generated by reducing emissions a decade ago have been helping limit damages ever since. 

In addition, earlier reductions help avoid “tipping points,” the greenhouse gas concentrations that scientists argue will trigger self-accelerating, profound and often irreversible shifts in Earth systems. Avoiding the accumulation of greenhouse gases, whether now or in the past, lessens the chances of passing these thresholds. As academic, author and architect Lloyd Alter puts it, “time is as important as technology when fighting climate change.” 

Investors need demand signals

A final argument we have heard is that buying from an older project does nothing to tackle global warming because the work has been done, the emissions already reduced or removed. Instead, companies should direct capital to projects that need to get off the ground.

This is like saying that buying rice from a grocery store is a bad way to stimulate demand for the staple. The demand signal would not be greater if consumers went directly to farmers. Going directly to the source is also inefficient; imagine if every rice buyer wanted to negotiate prices with producers. 

Purchasing existing credits builds the market by sending a broader demand signal that attracts the infrastructure — professional financiers, insurers and other intermediaries — needed for the market to work. 

Quality matters, not vintage

The idea that one needs to “match vintage” is a misunderstanding. Letting go of the need to purchase a credit issued in a particular year will give buyers more flexibility and broader supply to choose from, likely reduce costs, and help build a strong market for carbon credits. Focus on quality, not vintage. Buy credits with high integrity that speak to your company’s values and reduce your reputational risks.