IMPACT CARBON CREDITS

Prepared by: Tarvo Kärgenberg

October, 2023

INTRODUCTION
Carbon credits have become a vital tool in the global fight against climate
change. These credits represent a measurable reduction or removal of
greenhouse gas emissions and serve as a means to encourage environmentally
friendly practices. With various types of carbon credits available, they offer
businesses, governments, and individuals a way to offset their carbon emissions
by investing in projects that reduce an equivalent amount of carbon, contributing
to a more sustainable future.

Several types of carbon credits existed, with the two most common ones being:

1. Certified Emission Reductions (CERs): CERs are issued under the Clean
Development Mechanism (CDM) of the Kyoto Protocol. They are generated
from projects in developing countries that reduce greenhouse gas emissions.
CERs are often used in international carbon markets.
2. Verified Carbon Units (VCUs): VCUs are generated through voluntary
carbon offset projects. These projects are not tied to mandatory regulatory
mechanisms but are often undertaken by corporations, organizations, or
individuals aiming to voluntarily reduce their carbon footprint.
THE CARBON CREDIT SPACE

Carbon credits are a key component of efforts to mitigate climate change by

incentivizing greenhouse gas emissions reductions and supporting sustainable
practices. These credits represent a quantifiable and tradable unit of carbon
reduction or removal. Here are some of the main types of carbon credits:

1. Carbon Offsets: These are credits generated by projects that reduce or

remove greenhouse gas emissions. Common examples include reforestation,
renewable energy, and energy efficiency projects.
2. Renewable Energy Credits (RECs): These credits represent the
environmental attributes of renewable energy generation. They certify that a
certain amount of energy has been produced from renewable sources.
3. Verified Emission Reductions (VERs): These credits are typically used in
voluntary markets and are generated from emission reduction projects that
adhere to certain standards. Examples include Gold Standard and VCS
credits.
4. Certified Emission Reductions (CERs): These are credits generated under
the Clean Development Mechanism (CDM) of the Kyoto Protocol and are
typically used in compliance markets like the European Union Emission
Trading System (EU ETS).
5. Voluntary Emission Reductions (VERs): Similar to VERs but used in the
voluntary carbon market, which allows individuals and organizations to
voluntarily offset their emissions.
6. Nature-Based Carbon Credits: These credits focus on the conservation and
restoration of ecosystems like forests, wetlands, and grasslands, which can
sequester carbon naturally.
7. Technology-Based Carbon Credits: These are generated through projects
that employ technology to reduce emissions, such as carbon capture and
storage (CCS) projects.

Carbon credits enable businesses, governments, and individuals to compensate

for their carbon emissions by investing in projects that reduce or remove an
equivalent amount of carbon from the atmosphere. These credits play a crucial
role in addressing climate change by providing economic incentives for emission
reductions and fostering sustainable practices.
NATURE BASED CARBON CREDITS

Nature-based carbon credit solutions are one of the most commonly traded
carbon credit formats on them market for offsetting, and have gained significant
prominence in recent years as a promising approach to mitigate climate change
and promote sustainability. These solutions rely on the principle that nature,
through reforestation, afforestation, and other ecosystem restoration efforts, can
capture and store carbon dioxide, thereby offsetting emissions generated by
human activities. While they appear to be a powerful tool in the fight against
climate change, it's essential to critically examine the nuances of nature-based
carbon credits and assess whether they truly offer a viable and equitable
solution to our carbon problem.

Nature-based carbon credits, while a promising tool for mitigating climate

change, have raised concerns and skepticism due to several reasons. Here are
some of the main reasons why nature-based carbon credits can be viewed with
caution:

Accountability and Verification Issues: Measuring and verifying the actual

carbon sequestration and emission reductions from nature-based projects
can be challenging. The accuracy of reported results and the permanence of
carbon storage can be difficult to ensure. This lack of accountability raises
doubts about the effectiveness of these credits in offsetting emissions.
Land Rights and Displacement: Many nature-based projects require
significant land resources, and there are concerns about land grabbing and
displacement of indigenous communities or local populations. In some cases,
these projects may negatively impact traditional livelihoods and cultural
heritage.
Monoculture Plantations: Some nature-based carbon credit projects
prioritize the establishment of monoculture plantations, such as single-
species tree plantations. While these plantations may capture carbon, they
may not provide the same level of biodiversity and ecosystem services as
natural forests. This can lead to ecological imbalances.
Market Dominance and Greenwashing: Relying too heavily on nature-based
carbon credits can divert attention and resources away from more critical
actions, such as reducing emissions at the source, transitioning to clean
energy, and investing in sustainable technologies. This reliance can lead to
greenwashing, where entities use these credits to appear environmentally
responsible while continuing unsustainable practices.
NATURE BASED CARBON CREDITS

Commodification of Nature: The concept of carbon offsetting effectively

commodifies nature. It allows polluters to continue emitting greenhouse
gases under the assumption that these credits can compensate for their
emissions. Critics argue that this approach may contribute to a "pay-to-
pollute" mentality that doesn't address the root causes of emissions.
Uncertain Additionality: The concept of additionality is crucial for the
credibility of carbon offset projects. Additionality means that the emission
reductions achieved through the project would not have happened without
the financial incentives provided by carbon credits. Some nature-based
projects may not be truly additional, meaning that they would have occurred
anyway, even without carbon credit financing.
Lack of Standardization: The carbon credit market is fragmented, with
various standards, protocols, and certifying bodies. This lack of
standardization can lead to confusion and inconsistency in the quality and
rigor of carbon offset projects.

It's important to note that these concerns don't apply universally to all nature-
based carbon credit projects. Many organizations and projects are working to
address these issues and improve the credibility and effectiveness of these
credits. However, the complexity of these challenges underscores the need for
transparency, accountability, and responsible project development in the carbon
offset market. Before relying on or investing in nature-based carbon credits, it's
essential to conduct thorough due diligence and ensure that the projects adhere
to best practices and sustainability principles.
THE MARKET REQUIRES A CHANGE

New alternatives for nature-based carbon credits are necessary for several
compelling reasons, including increased transparency for buyers and societal
benefits:

Verifiability: Current nature-based carbon credit projects can sometimes

face challenges in accurately measuring and verifying their carbon
sequestration and emission reduction impacts. New alternatives should
prioritize more robust and transparent methods for calculating and validating
these results.
Additionality: Demonstrating the additionality of projects, i.e., proving that
emissions reductions would not have occurred without the carbon credit
financing, is often difficult. New alternatives should aim for clearer
additionality criteria to ensure that projects genuinely contribute to carbon
reduction goals.
Accountability: Transparency is essential for maintaining accountability in
carbon offset projects. Buyers and the wider society need clear reporting and
auditing mechanisms to track the actual impact of these projects.

Due to the recent trust issues and greenwashing speculations, organizations are
pulling back from purchasing nature-based carbon credits.

While the demand for quality carbon credits is skyrocketing, the trust is clearly
shrinking and the market would prefer reliable alternatives that actually have an
effect and can be easily and clearly demonstrated.

We’re developing for the marrket two new carbon credit solutions, currently in
the certification phase:

renewable energy based impact carbon credits

additionality carbon credit

Both act as crucial element for the society and socio-economical good while the
impact is real and easily provable, creating an highly attractive new instrument
for organizations to offset with real effect to people’s lives.
IMPACT CARBON CREDITS

"Impact carbon credits" is not a standardized or widely recognized term in the

carbon credit market. However, the concept behind impact carbon credits is
closely related to the broader idea of carbon credits and their positive
environmental and social effects. In essence, impact carbon credits refer to
carbon credits generated from projects or initiatives that not only reduce
greenhouse gas emissions but also have a demonstrable positive impact on
various environmental and social aspects. These projects typically aim to create
meaningful and measurable benefits beyond emissions reductions. Impact
carbon credits may encompass a variety of project types, including:

Renewable Energy Projects: Projects that generate renewable energy from

sources like wind, solar, or hydro power can reduce emissions and have a
positive impact by decreasing reliance on fossil fuels and promoting clean
energy.
Rural Development Initiatives: Projects that invest in rural communities,
such as providing clean water, healthcare, education, or job opportunities, in
addition to reducing emissions, can be considered impact carbon credits.
Reforestation and Afforestation: Projects that restore or establish forests
not only sequester carbon but also enhance biodiversity, provide habitat for
wildlife, and offer economic opportunities to local communities.
Clean Cooking Solutions: Initiatives that promote clean and efficient cooking
technologies in developing regions can reduce indoor air pollution, improve
health, and reduce carbon emissions.
Conservation and Biodiversity: Projects focused on the protection and
conservation of critical ecosystems can have wide-ranging impacts, including
the preservation of biodiversity and ecosystem services.
Community-Based Sustainable Agriculture: Projects that promote
sustainable and regenerative agricultural practices can reduce emissions
from land use changes and enhance food security for local communities.

While the term "impact carbon credits" may not be an officially recognized
category, it represents a growing emphasis on the broader positive impacts that
carbon offset projects can have. These projects often align with the United
Nations Sustainable Development Goals (SDGs) and aim to address not only
climate change but also social and environmental challenges. Investors and
organizations interested in carbon credits may seek projects that provide
measurable and transparent benefits in multiple dimensions, making them
impactful in a holistic sense.
RENEWABLE ENERGY BASED IMPACT CARBON
CREDITS

An Impact Carbon Credit, based on roof-as-a-service and energy-as-a-service

models, is a unique approach to carbon offsetting that creates tangible and
measurable environmental and socio-economic benefits. These credits are
generated through innovative projects that address various sustainability
challenges and provide a range of advantages, both in terms of reducing carbon
emissions and promoting socio-economic well-being. Here's a detailed
breakdown of the components of this Impact Carbon Credit:

Roof-as-a-Service Model: This model facilitates the renovation of roofs in

residential buildings by including the renovation costs in regular energy bills.
Homeowners in apartment buildings do not have to borrow money from
banks for these renovations. This approach promotes energy efficiency,
reducing the carbon footprint of these buildings. Moreover, by accurately
tracking savings, it provides a measurable and immediate impact on people's
budgets, making it more affordable for individuals. This, in turn, has socio-
economic benefits, especially for rural areas where affordability is often a
significant barrier to renovation.
Energy-as-a-Service Model: Companies can benefit from Power Purchase
Agreements (PPA) and energy-as-a-service models, which allow them to
access renewable energy sources without making substantial upfront
investments in rooftop solar and solar carports. This supports companies in
achieving their ESG (Environmental, Social, and Governance) targets. The
socio-economic impact is significant, as it enables companies that may not
otherwise afford such investments to transition to cleaner energy sources.
This transition can positively affect their loan pricing and enhance their
standing with trade partners demanding lower carbon footprints.
Sports Infrastructure Development: By using solar panels on the roofs of
large sports facilities, municipalities and sports clubs can overcome financial
barriers and build community-enhancing infrastructure. This approach not
only provides access to renewable energy but also fosters socio-economic
development by offering recreational opportunities to communities. It is a
clear example of how sustainable initiatives can have far-reaching positive
effects on society.

Renewable energy based Impact carbon credits enable us to track how many
people how much save per month while not obliged to take out a loan for
renovation, how much companies can invest more into their core business and
sustainability, how much of the total energy consumed in buildings really is
green etc.
RENEWABLE ENERGY BASED IMPACT CARBON
CREDITS

Unlocking Private Capital Investments: One of the critical benefits of this

model is its ability to attract private capital investments for renovation and
new build projects that might not have otherwise been considered attractive
to private investors. By demonstrating the financial viability of these projects,
you can engage private investors who seek both financial returns and the
opportunity to contribute to sustainability.
Off-Grid and Net Zero Buildings: Integrating solar panels with battery
storage in buildings enables them to operate off-grid and achieve net-zero
energy consumption. This maximizes the use of renewable energy, reducing
reliance on fossil fuels and minimizing greenhouse gas emissions. These
changes have a significant impact on reducing carbon emissions and
enhancing the sustainability of the built environment.

Carbon credits are a crucial element of this model, as they provide the necessary
funding for capital-intensive projects like roof renovations, solar installations,
and energy infrastructure enhancements. These credits are a reflection of the
real and measurable impact created by the project in terms of carbon reduction,
socio-economic improvement, and financial savings. Unlike some nature-based
carbon credits, which can be less transparent or quantifiable, these impact
carbon credits provide a clear and verifiable measurement of their impact on
monetary, socio-economic, and environmental aspects. This transparency and
reliability make them an attractive option for investors and organizations
committed to sustainability and meaningful change.
 RENEWABLE ENERGY BASED IMPACT CARBON
CREDITS

We enable retrofitting
the roofs against a solar
roof for free

Zero cost for the apartment buildings

An average solar roof costs 250,000 euros. The owners
don't need to invest a penny into it.

Renovation paid within the electricity bill

The homeowners will start purchasing the energy from the
investor instead of the grid, the bill will include 2 services.
 RENEWABLE ENERGY BASED IMPACT CARBON
CREDITS

100K 200K 0
EUR without solar EUR with solar EUR with PPA

50 80 40
EUR monthly for the EUR monthly for the EUR monthly for the
electricity and electricity and electricity and
renovation loan renovation loan renovation loan

24 families save 80 EUR monthly for 20y

Built in 1960, the 18 families living in the house,
Why does it celebrated last summer the 62th birthday of the
building. While life in cozy Haapsalu is nice, they
9 months in a year energy independency

64 tons per year CO2 emissions reduced

are facing an issue.

matter? Namely, the roof was renovated 15 years ago but
not in quality - it wasn't insulated back then so it's
A recent fire in the building has caused quite some damage to the
heating literally the air, and the roof also is leaking.
building and apartments. Luckily nothing that can not be fixed.

They are looking for options to replace the roof

The downside - while the apartment owners have insurance, the
and insulate it but borrowing from the bank is too
building did not have one. Because of that the insurance companies
expensive. They love the idea of getting the roof
12 families save 59 EUR monthly for 20y that would cover the renovation of the apartments will not allow any
fixed with our Roof-as-a-Service model.
work before the roof has been repaired.
9 months in a year energy independency

They don't have a quick fix and 24 families suffer from the situation in
48 tons per year CO2 emissions reduced 18 families save 50 EUR monthly for 20y
the middle of winter.
9 months in a year energy independency
Our Roof-as-a-Service as an impact solution would enable to solve
46 tons per year CO2 emissions reduced the situation rather fast.
The house built in 1990 for 12
families till today is located in a
peaceful neighborhood, surrounded
by lovely nature, making living in the
city like in a quiet town.

While the roofs built during soviet We've also designed a way of 8 families save 79 EUR monthly for 20y
times should last approx. 40 years, how it would be possible to set
9 months in a year energy independency
the particular one is already in very up safe small multifunctional
bad condition, possibly leaking. infrastructure in the cities, and 43 tons per year CO2 emissions reduced

for the apartment and

For the renovation, a large budget commercial buildings. For free.
would be necessary which the Currently the oldest apartment house in our pipeline, built in 1959, is
apartment owners don't want to We literally install the bicycle feeling anxious as the roof, never been renovated, doesn't seem keeping
invest lightly. houses with a solar roof, turn up any more longer.
them sustainable and self-
Having familiarized with our Roof-as- sufficient. They are looking for opportunities on how to remodel it, and they love the
a-Service model, they would be idea of our Roof-as-a-Service, where they could get a new roof while
5 bicycle houses with 75 parking positions
happy if we could apply it on their Today we have 5 bicycle simply keeping to pay the electricity bills as usual.
house, got the roof fixed, save them 150,000 euro saved for the ap. buildings houses in the pipeline to be
from borrowing the funds and ensure installed for apartment
20 tons per year CO2 emissions reduced
energy prices stability. association in Tallinn.
RENEWABLE ENERGY BASED IMPACT CARBON
CREDITS

Supermarket

Supermarket is a retail chain in the Baltics, having 100+ stores and

high ESG goals. An important part of achieving them is covering the
high energy needs by consuming locally produced renewable energy.
However, the roof structures cannot bear the extra weight, so
shelters must be built in parking lots. Supermarket itself does not
want to invest in it, instead they would like to sign a PPA.
1 Project details 2 Guarantees 3 Offering to investors

500kW PV system 25-year PPA contract 10% average yield

~1M eur project price Building right quarterly payouts
6m construction time Easements
100% of the energy
produced is consumed
locally

Lauma (LV)

Lauma is a manufacturing company with an international reach,

which, due to its reach, is subject to strict ESG goals. The green
footprint is also important to them when negotiating with export
partners. However, Lauma wants to use his capital to promote the
business, and prefers the PPA format when establishing PEJ.

1 Project details 2 Guarantees 3 Offering to investors

1100kW PV system 15-year PPA contract 10% average yield

~775k eur project price The right to use the roof quarterly payouts
4m build time Easements
90% of the energy
produced is consumed
locally
 ADDITIONALITY IMPACT CARBON CREDITS

Additionality in the context of renewable energy projects and RECs refers to the
concept that certain renewable energy projects would not happen or be
financially viable without the ability to monetize RECs. In other words, the
projects are additional to what would have occurred without the existence of
RECs and the revenue generated from them.

The notion of additionality is essential because it highlights the role of RECs in

driving the development of new renewable energy based and intense projects
that may not have been undertaken without the incentive provided by the sale of
RECs. It helps ensure that the environmental benefits associated with renewable
energy production are real and substantial, as opposed to simply subsidizing
existing projects or activities that would have occurred regardless of RECs.
Additionality also enables to execute all the projects listed in the previous
section.

Additionality impact carbon credits enable us to finance build environments and

solutions that else never would find financing. Thanks to that, we are easily able
to track how much private capital we’re able to attract to each location, how
many children get access to sport opportunities, how much renewable energy is
being used from the total energy consumption in the communities, if the
municipality is able to organize sports events and how many people it will
attract to visit the place etc.
 ADDITIONALITY IMPACT CARBON CREDITS

An additionality carbon credit is a concept in the context of carbon offsetting

and emissions reduction initiatives. It refers to the idea that a carbon credit
should represent a real and measurable reduction in greenhouse gas
emissions that would not have occurred in the absence of the carbon offset
project. In other words, for a carbon credit to be considered additional, it
must demonstrate that it goes beyond business-as-usual emissions
reductions. Pros of additionality carbon credits:

Environmental Integrity: Additionality ensures that carbon offset projects

are genuinely contributing to emissions reductions. This maintains the
integrity of carbon credit systems and helps in the fight against climate
change.
Incentive for Innovation: By requiring projects to go beyond business-as-
usual emissions reductions, additionality encourages the development of
innovative and more sustainable technologies and practices.
Increased Investment: Investors and businesses are more likely to support
and invest in carbon offset projects that offer additionality because they can
be more confident in the projects' impact.
Local and Global Benefits: Additionality often leads to a broader range of
benefits, such as improving air quality, conserving biodiversity, and creating
local jobs, in addition to mitigating climate change.
Transparency and Credibility: Additionality requirements enhance the
transparency and credibility of carbon offset projects and carbon markets,
reducing the risk of greenwashing.
Economic Opportunities: Additionality can create economic opportunities in
regions that need them by stimulating the development of clean energy
projects, reforestation, and other emissions reduction initiatives.
Support for Sustainable Development: Additionality encourages projects
that support sustainable development in addition to emissions reductions,
which can help address multiple societal and environmental challenges.
Alignment with Climate Goals: Additionality helps align carbon offsetting
with the overarching goals of the Paris Agreement and other international
climate agreements, which aim to limit global warming to well below 2
degrees Celsius above pre-industrial levels.

It's important to note that defining and proving additionality can be complex and
contentious in practice, and different carbon credit standards and methodologies
may have different criteria for determining additionality.
ADDITIONALITY IMPACT CARBON CREDITS

Football hall
Thousands of families and kids affected

encourages public-private partnerships

1200 tons per year CO2 emissions reduced

We have multiple municipalities that are looking for the opportunities

to build an indoor football hall for the community. As it's a costly
project and the municipalities running on tight budget, they are
looking for alternative opportunities to make it happen. PPA-based
solar hall is a genius solution where against the regular electricity bill
a new sport facility could be built to the community with no cost.
1 Project details 2 Guarantees 3 Offering to investors

1700kW PV system 30-year PPA contract 10% average yield

~4.5M eur project price The right to use the roof quarterly payouts
9m construction time Building right
80% of the energy Easements
produced is consumed
locally
SUMMARY

The modern economy requires a delicate balance of trust and transparency to

meet the demands of both bill payers and the environment. To achieve this
equilibrium, renewable energy-based impact and additionality carbon credits can
be the emergers as transformative tools.

Trust and Transparency: Trust and transparency are essential in today's

economy. Consumers, investors, and the public need to trust that businesses
and institutions are acting responsibly. Transparency ensures that actions
and intentions are open to scrutiny, fostering accountability and credibility.
Better Value for Bill Payers: Bill payers, including consumers and
businesses, seek economic efficiency and cost-effectiveness. They expect
value for their money, making it imperative for economic activities to provide
tangible benefits while minimizing wastage.
Renewable Energy-Based Impact: Embracing renewable energy sources not
only reduces carbon emissions but also drives economic growth.
Transitioning to renewable energy can create jobs, reduce energy costs, and
stimulate innovation, offering long-term economic benefits.
Additionality Carbon Credits: Additionality carbon credits ensure that
emission reduction projects go beyond standard practices, making a real and
measurable impact on greenhouse gas reductions. This creates a trustworthy
mechanism for organizations to offset their emissions and contribute to
climate change mitigation.
New Economy for Society and Communities: The adoption of renewable
energy and additionality carbon credits unlocks a new, sustainable economy
that benefits society and local communities. This transition can bring
economic opportunities, cleaner air, and improved well-being, aligning
economic growth with environmental sustainability.
Practical Instrument for Companies: For companies seeking to offset their
carbon emissions, additionality carbon credits offer a practical and reliable
solution. They allow organizations to invest in projects that not only reduce
their carbon footprint but also support broader environmental and social
goals, enhancing their corporate responsibility and sustainability efforts.

As a conclusion, achieving a balanced, sustainable, and responsible economy

demands trust, transparency, and value for bill payers. The integration of
renewable energy and additionality carbon credits represents a promising
avenue to build a prosperous and environmentally responsible economy,
benefitting both society and companies alike.