Innovative intermediaries—disruptive new business models in the carbon finance value chain: Take-Aways from our Carbon Finance Webinars

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This blog was published on 2nd February 2024.

Carbon finance is generating much excitement in the distributed solar industry though the opportunity remains tantalisingly out of reach for most companies. In response to this interest, GOGLA has been hosting a six-part webinar series for our members, with a) the aim of increasing our collective understanding of this potential revenue stream and b) exploring the requirements for the off-grid solar (OGS) sector to create and sell high-integrity offsets.

After being introduced to the Voluntary Carbon Market, the relevant methodologies for solar energy providers and the necessary monitoring and verification techniques, we dived into the world of innovative technologies on 18th of January. Carbon Clear presented how their data-driven model can facilitate access for more players in the off-grid solar space. Uganda’s Aptech Africa shared how entering the VCM through their partnership with Carbon Clear has increased their access to finance and visibility. We also learned from technology provider and project developer Verst Carbon how their services can aid equitable community benefit sharing amongst other benefits. Learn more key take-aways here:

1. Demand of off-grid solar carbon credits is expected to increase significantly

The global demand for voluntary carbon credits has been growing over the last years, and experts estimate it could greatly increase in the future. Verst Carbon and Carbon Clear both stated that the Voluntary Carbon Market has potential to increase 15x by 2030, and even by a factor 100 by 2050, creating a global demand of 1.5 to 2.0 GtCO2, worth potentially $50 billion dollars. For Carbon Clear, an intermediary platform currently operating with 15 OGS companies, this could result in an inventory of $55.5 million in 5 years based on existing agreements alone.

2. Innovation in the value chain is needed to fulfil this demand in the future

The current challenges that exist, especially for small-scale players, to enter the Voluntary Carbon Market, include complex application processes, rigorous validation and verification requirements compounded by limited technical capacity amongst project developers lead to high costs, hindering the necessary scalable growth. Also, the processes for Monitoring, Reporting and Verification (MRV) of the most-used standards do not leverage innovative technologies, such as Internet of Things (IoT) and Blockchain. The current assessment criteria are often designed for non-data driven solutions, making it difficult for these kinds of solutions to access the market. To fulfil the increasing demand in future, innovation in the value chain is needed to create faster and cheaper access to the Voluntary Carbon Market, and in a manner that is inclusive in which the Base of the Pyramid is not left out.

3. Leveraging new technologies and business models can increase the supply of high-quality credits

For many smaller players in the industry, the process of carbon credit reception can be long, resource intensive and costly whilst the revenue schemes may be uncertain and the market not always transparent. Also, exclusion of digitized and data-driven mechanisms to generate and verify carbon credits complicate entering the VCM for these entities. Digital Monitoring, Reporting and Verification (MRV) however, that is now offered by innovative intermediaries such as Carbon Clear and Verst Carbon can provide a solution to shorten the pathway between supply and demand. The shorter timeline and higher cost effectiveness lead to revenues of 70% for the project owner, compared to 30% for more conventional standards. Whilst the technologies provide for digital generation and verification of the carbon credits, companies can play their part in ensuring good quality data, significantly reducing the efforts and timeline of carbon revenue generation.

4. Careful selection of an intermediary platform can help increase carbon credit values for off-grid solar companies

There is rapid innovation in the carbon finance ecosystem, with service providers entering the market with new tech and business models. This creates opportunity and options for OGS companies, though it can be difficult to navigate the landscape and select the best partner and platform. Important factors in making a decision are whether the solutions is tailored to the specificities of the off-grid solar players, the costs and revenue sharing model and the compatibility and integration with company’s systems. For Aptech Africa, the digital and data-driven verification of carbon credits by Carbon Clear harmonizing with their own data platform was an important reason to do business with them. For others, the flexibility and knowledgeability in the local context of African-based service provider Verst Carbon can be an important selling point. Their equitable community benefit sharing model can also provide proof for additionality and co-benefits, in turn increasing the value of credits.

What’s Next? Learn more about the players on the demand side in our next webinar on 15 February at 14 pm CET. GOGLA Members get free access to the webinar series—send an email to p.vanbasten@gogla.org to secure you’re place.

We would like to thank our partners and speakers – Catherine Allinson, Director, Future Earth, Karim Jabbar, CEO, Carbon Clear, Paul Kamoga, General Manager, Aptech Africa and Wangui Kagumba, Lead Benefit Sharing, Verst Carbon– for their insightful contributions towards the second webinar in the series.

The Carbon Finance webinar series is being funded by  GET.invest, a European programme that mobilises investment in renewable energy, supported by the European Union, Germany, Norway, Sweden, the Netherlands, and Austria.

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