Voluntary Carbon Markets: The Sellers

Issuing carbon credits based on natural assets can seem to be an overwhelming task. How do you go about assigning a value on the carbon sequestration ability of a forest, a coastal wetland, or a rice field?

That is one of many questions a seller who wishes to participate in a voluntary carbon market (VCM) must answer. But stepping back, one has to ask, why would a government/sovereign nation or landowner want to participate in the VCM in the first place?

Our previous article, Understanding the Voluntary Carbon Market, provided an overview of the VCM, its role, and its participants. In this article, we’ll dive deeper into the role of the seller and what incentives drive their participation.

Sellers in a Voluntary Carbon Market

Sellers supply the VCM with carbon credits. Since carbon credits can be issued based on the ability to sequester CO2, the sellers tend to be the owners of natural assets: governments/sovereign nations, large landowners, and collectives made up of many small landowners.

Governments

This is a broad category that can include sovereign nations, states, or agencies within national, regional, or local governments. At its core, these groups are looking for ways to increase economic growth from land-based environmental innovation while also incentivizing those who do the work.

For many nations, natural assets such as forests and farmlands, serve as significant sources for their economy. Whether it is in food-related exports, or products made from wood, for example, these governments not only have an interest in preserving these natural areas, but also in ensuring that they sustainably support local jobs.

As we note in our series on how carbon is sequestered in natural assets, beginning with Forestry, natural assets provide the means to reduce CO2 emissions. By identifying the carbon sequestration value of a natural asset (a forest, wetland, or agricultural land) and creating/implementing an initiative that either removes CO2 emissions or protects species that absorb CO2, these initiatives can be funded with capital otherwise not available. We call this natural capital monetization, where nature benefits from capital that is allocated to preserving it.

Large Landowners

Large landowners, often farmers or landowners who have huge herds of cattle or other types of herds, can also realize carbon credits through initiatives that promote plant growth or biodiversity. Our article on carbon & biodiversity delivers additional examples of how carbon can be sequestered thereby reducing CO2 emissions.

Collectives

Collectives, often found in the farming industry, are groups of small farms or landowners who combine efforts for a variety of reasons: purchasing power, bargaining efforts – and, in our context, they can pool their land together for the purposes of issuing carbon credits based on their land’s carbon sequestration. By banding together, they can bring to the market a larger pool of carbon credits.

Sellers’ Incentives in the VCM

Like any seller in any market, the more you can get for your product, the better.

As in any market, the supply and demand of carbon credits plays a pivotal role in the price of a carbon credit at any given time. In addition, the VCM prices carbon credits in three tiers.

Our article, Carbon Credits Explained, goes into more detail on pricing. All this being said, sellers want to receive the most revenue as they can for their carbon credits. Sellers also need technology that keeps track of the data, of the carbon credits issued, and when conservation initiatives contribute to the additionality of carbon sequestration.

Laconic’s Role with Sellers

Recalling the question posed at the beginning of this article – how do you go about assigning a value on the carbon sequestration of a natural asset – this is where Laconic provides technology, expertise, and a deep respect for the region’s norms and cultures.

Laconic works with governments, landowners, and collectives through its Natural Capital Monetization (NCM) offering. Through a 4-step process, Laconic gathers and processes data about every environmental variable in the natural asset, assigns a standard classification for every hectare, aids in having the data verified so that it can be priced at the highest tier, and can assist in the financial transactions and revenue disbursements.

Next, we’ll explore the Buyers in the VCM and what their incentives are.