Former Verra veteran envisions an unshackled carbon market and a new endgame

The founding chief executive of Verra, the world’s largest carbon credit certifier, sees at least two key areas where change is needed.

First, the market should adopt an “end game” for emissions-saving initiatives to become economically viable without carbon financing. Someone will need to define the “positive tipping point” at which this happens in each sector – be it sustainable agriculture, reforestation, or clean energy – rally participants towards the goal, and then disallow the sale of carbon credits thereafter.

Second, Antonioli thinks that project approval rules should be simplified to help initiatives get going faster. This means approvals should be based on simple lists of eligible activities, instead of complex mathematics, PhD-length reports and multiple rounds of checks that are currently required.

Antonioli shared these ideas in a recent series of reports published by his advisory firm Transition Finance. He had earlier spent 15 years at Verra, and had helped mainstream many of the carbon market rules used today. He was also in the hot seat last year when Verra was accused of having rules that allowed developers to massively oversell forest carbon credits – a charge Antonioli rebutted prior to his leaving last summer.

How would Antonioli’s ideas work, and will the market accept them, given that its participants are still polarised on issues of integrity, scrutiny and the worth of carbon offsetting?

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I think the market is going to stabilise. Is that enough? I don’t think so. It leaves open the question of what happens at the end of carbon projects, and I strongly believe we need to find a fix for that.

David Antonioli currently runs his own sustainability advisory, Transition Finance. He had been the founding chief executive of carbon credit certifier Verra from 2008 to 2023. Image: David Antonioli.

Tune in as we discuss:

• How the idea of a “new paradigm” for carbon markets came about
• Who has the authority to define positive tipping points for various sustainability sectors
• The unique circumstances surrounding nature-based projects
• Whether the market will accept a push for efficiency, given its hunger for scrutiny
• Antonioli’s next steps

The edited transcript:

How did the vision of a new paradigm for carbon markets come about?

It has been churning in the back of mind a little bit here and there – there were instances where I thought of something and perhaps didn’t follow through while at Verra. There you’re so busy doing the day-to-day that oftentimes you don’t have enough time to sit back and reflect.

There have been some bad apples, and unfortunately those have come to define in some ways the market, but I don’t think that is indicative of what the market is and can do.

My insight is really that we need to start with the end in mind, by asking ourselves: what do we need to achieve given the scale of the challenge? Carbon markets started as a tool to allow a company to use carbon credits that they could purchase from elsewhere to compensate for their emissions. That’s fine, but the rules set out to do that were somewhat limited. It enabled finance to flow, but not at scale.

So we’ve spent a lot of time thinking about how to make sure that there’s integrity in the rules, but we haven’t spent any time thinking about how to use the money to enable the kinds of transitions that the world needs. 

I think we can achieve this with some changes to the rules. They are not radical changes – we have some working models out there already. It is just a matter of identifying what I call the end game. What happens when there is no more carbon finance? Quite frankly I’m not sure that people can answer that question. We think we’re doing good things, but we haven’t set out explicitly what we want to achieve at the end of the project, and that’s a concern.

The idea of having the end in mind would essentially be based on the concept of “positive tipping points” – PTPs. Tell us more about this.

I was listening to an Outrage + Optimism podcast where Tim Lenton from the University of Exeter was speaking with [former head of the UN Framework Convention on Climate Change] Christiana Figueres, and they were talking about positive tipping points. And I was like, “aha, that’s it”. That is the concept I was looking for. The idea is that some activities can be supported in the early stages, so that they get to the level where they no longer need additional support to grow.

Carbon finance is in many ways a subsidy. Once we recognise it as such, we should be using the subsidy as a way to drive what I’d call new businesses for the future. But also know when to stop the subsidy. Another important point is that positive tipping points only apply to projects with an underlying economic value to them.

Think about regenerative agriculture. At first, farmers don’t want to do it – it’s costly, it’s risky, there’s all sorts of people telling them it is going to be a disaster. So you apply carbon finance to get farmers to take on the practice. Then at some point, ideally, farmers realise that it actually isn’t so bad. The yields may return. Farmers would be better prepared for droughts and floods. They’ve diversified their revenue. But in order to get there, you need something to help get through that initial stage, and that’s where carbon finance is going to be really powerful.

So a positive tipping point in this context is getting enough farmers to switch to regenerative agricultural practices so that all the farmers in the region agree to do so. In the process, you would also have built new infrastructure, trained farmers, got local banks to provide loans, and de-risked the entire proposition. Then you don’t need carbon finance anymore, and big investments can come in and make the kinds of bets that you need to transform sectors of the economy.

We need to identify activities that have potential, support them up till a certain point with climate finance, and then stop the support to let them run on their own.

Who has enough authority to set PTPs – since it involves defining a point where carbon credit sales need to stop?

We need to start testing this concept out, and figure out what it looks like. We need to rely a lot on the literature and knowledge out there about companies which have introduced new products – some successful and some failed.

We should be learning from governments – the United States is a great laboratory right now with the Inflation Reduction Act sporting all sorts of new technologies to enter the market with cutoff points and reduction in subsidies. Development agencies worldwide have done this for years, they’ve been successful in some areas, less so in others.

I think more academic understanding is needed so that we can create a framework that works for carbon markets. And you need to start small, to pick a few areas to identify positive tipping points. For example, if its about regenerative agriculture in India, there are parts of the country richer than others, so you might want to have different positive tipping points by regions. This does require some work upfront.

On who has authority – I think in some ways this could be done through the greenhouse gas crediting programmes like Gold Standard and Verra, since this is what they generally do already. They create frameworks, bring in expert inputs during consultations and set up the rules. So start with the end in mind, define the endgame, then approve projects as they come.

The good thing is you could perhaps start to discount emission reductions as you get closer to the positive tipping point, because the first person who undertakes a venture is going to face a very different set of circumstances from the last person.

But the real important thing is, once you know there is a certain runway for investing, it gives investors a much clearer line of sight for what they can do, compared to currently where things are done on an incremental, piecemeal basis. If we know that we can get credits from cookstove projects until you reach, say, 15 per cent of the population, then investors will see that there is a real opportunity to not just generate carbon credits, but to create a new business that is eventually going to run on its own.

Let’s start using carbon finance to create the businesses of the future and not stop at creating a tonne of emissions savings. We need to use it as a tool for a deeper and more enduring transformation.

How would a PTP for nature-based solutions work – it seems like maturity in the sector would involve both economics and government intervention?

The PTP, as I mentioned before, really only applies to activities that have an underlying economic value, so that they can stand on their own. For REDD [Reducing emissions from deforestation and forest degradation – generally understood as forest conservation], I’m not entirely certain those projects can indeed stand on their own. There is a risk that once a project ends, those trees could get cut down.

This doesn’t just apply to conservation efforts. This happened with my landfill gas projects when I was at [project developer] Ecosecurities. It turns out that many of the projects were just capturing and flaring gas, without capturing any underlying economic value. They’ve since been mothballed, equipment’s been vandalised, the technicians are working elsewhere, and the methane is going into the atmosphere because there was noone to stand in after the project ended. 

So in some cases, we need to get governments on board. We need to get governments to say, look, I’m going to use carbon finance during the crediting period. I’m going to welcome it so that I can build the capacity, introduce the technology and reduce costs. At some point, I’m going to step in and actually ensure that the venture continues. If it’s a forest conservation project, governments need to take over the protection in, say, 30 or 40 years.

It is going to be challenging, some governments will change, and that’s fine – that’s what we deal with, right? But I bet there will be some governments willing to make the bet. They can set up a trust fund, so that there are enough resources to keep conservation projects going once the carbon project ends.

Governments ought to be willing to do this because they’re getting the technology, capacity, skill sets and jobs. So that means if they have to backstop these projects, the costs should be significantly lower.

Where I think PTPs can play a role in natural climate solutions is in beyond simply doing forest conservation. The key is to break down the barriers that currently require developers to only do one type of natural climate solution at a time.

So the current additionality tool – it is a logical framework, but the problem is it requires you to assess every individual project type with this incredibly complicated, cumbersome and costly process that requires you to prepare a project description which can run up to 200 pages – I call it the equivalent of a PhD thesis.

So if you want to do REDD, that’s 200 pages. Agroforestry, another 200…regenerative agriculture…so it is no surprise that projects are focusing on a single activity. But the financing that comes out of multiple project types together can be incredibly complimentary.

Forest conservation finance comes pretty quickly – you stop the deforestation, you get your money. Carbon removal projects such as reforestation takes time – you plant the tree, it takes some eight years to grow. So why don’t we blend these projects together to form a more resilient system, where forest conservation proceeds can fund restoration and agroforestry?

With the revenue from agroforestry, you could get farmers to jointly invest in a processing facility for their goods to derive more value from it, instead of selling to the first buyer that comes along, who pays nothing for the goods because there is incredible information asymmetry working against farmers. But you tell the farmers, you have to have a certain amount of tree cover to be part of this. Now you have a local economy, and at some point, you can say no more carbon credits – while the forest conservation part of the project gets taken up by the government.

This requires a bit more thinking, but you could say the PTP here is that, say, you need 20 per cent of farmers to adopt the agroforestry practice – before everyone else comes on board. If this works, and say 60 per cent of farmers eventually switch to more sustainable practices – you’ve tripled your impact. This is the type of change we need.

You propose using simpler eligibility lists to approve carbon projects, in place of the traditional additionality tools. In such a case, would one carbon credit still equal a tonne of carbon dioxide savings?

This is the first question people ask me – so you’re throwing additionality away? I think the tonne-for-tonne concept still applies. We already have models that work like this.

The Climate Action Reserve [a carbon credit certifier] started out with this approach. They looked at what the [United Nations’ carbon offsetting scheme] Clean Development Mechanism had done, and thought it had some issues, so they created positive lists of eligible projects – basically lists of climate activities we know are not happening. They have a set of eligibility criteria, if you implement them, you can get credits.

It helped avoid an endless discussion on whether something is additional or not. People will still be having a debate, but now we can start to define what we are trying to achieve. The additionality tool today is just not a scalable model. You require, again, 200 pages of justifications that are always going to be subject to debate. Unless we extract ourselves out of that, we will end up in the debate forever.

Afterwards California state took the positive lists model and adopted it for their cap-and-trade programme. My only critique is that this programme never really identified what the endgame is.

So I think the tonne-for-tonne concept still sticks. Maybe there are adjustments you can do. So if you have a long-term positive tipping point, let’s call it, say, 15 per cent of a market penetration. Then you can discount the amount of credits produced over time. Maybe for the first 5 per cent of market penetration, you get a tonne’s worth of carbon credits for a tonne of carbon emissions saved. The next 5 per cent, you get 70 or 80 per cent worth of credits. Last 5 per cent, 60 per cent worth of credits.

The claims a company would make is exactly the same, to address unabated or unabatable emissions. I think this model could even help them, in two ways.

If I were a chief sustainability officer, I would much rather be supporting something that has a transitional framework in it. It is one thing to be buying a tonne of carbon credits to offset unabated emissions. It is a whole different narrative to say I’m investing in a sustainability sector that is supporting a transition towards something bigger. There is tremendous marketing and branding value from that.

The other thing is, food and consumer goods companies are now forced to go down their supply chain and check for compliance at farm level for a clean supply chain. That’s fine in theory, but in practice it is complicated as hell. So why not invest in a carbon project covering a whole watershed or landscape, and start creating a sustainable economy so that products coming from this area will evolve to eventually become sustainable. Then you don’t need to worry about making sure individual farmers are doing the right thing.

I think there is a way to create a more streamlined, pragmatic solution. I also think there is a better way of managing the system so that we’re not caught up in this cumbersome, incredible complicated and costly process that cannot scale.

Those who want more scrutiny in the carbon market would be unhappy with a more efficient set-up of additionality checks under what you propose. How do you deal with that?

I’m sure there will be people who will debate this, and won’t like it.

Let me just say one thing. You talk about scrutiny – it’s not that there’s less scrutiny here. It’s just that the scrutiny happens at the very beginning. Right now, you take a project, and you apply the additionality tool. When people look at your justifications and project description, they point out if certain barriers, or certain financial additionality elements do not make sense.

This debate essentially means every single project has to go through an entire industry review, to justify it is addressing certain barriers preventing the project from happening on its own. This requires extensive industry knowledge in every single auditor, in every single greenhouse gas crediting programme.

This is why things take forever. People believe it is rigorous, and in many ways it is. What I’m saying is, let’s take all that, which happens at the tail end of the process, and do it up front. Let’s assess what is needed to transform a particular sector of the economy. Let’s put some academics and experts on it. Let’s get some government officials in. Let’s get some private sector perspective, and do a proper, rigorous consultation.

Then you have a model that can actually give the market a basis to invest in a much more pragmatic and thoughtful way to achieve the kinds of changes you need. So it’s not that there is less rigour or scrutiny. It’s just that things happen up front.

What are your next steps?

There are two concept notes that I’ve attached to chapters two and three of the report. One is on identifying some positive tipping points and really creating a model for what this could look like going forward – ideally we can find some resources for this research.

The other concept note is the idea of creating “corresponding commitments”, the idea being governments stepping in and making a commitment going forward, and using carbon finance to achieve it. The idea is perhaps we can add this to the lexicon and set of tools set out in the Paris Agreement.

I think the Paris Agreement is great, but it does have some limitations. We promised US$100 billion of finance yearly back in Copenhagen, and we barely just got to that in the last few years. 

The corresponding commitment could well be taken up by state or subnational governments who can’t make national commitments. So state governments might make a commitment to protect forests in exchange for carbon finance. They may commit to regulating industry in exchange for carbon finance. That could be really interesting.

The idea of a corresponding commitment complements the corresponding adjustments piece, if you think about it. Article 6 [United Nations’ new carbon market] is great because it allows for trading, but there is a bit of contradiction when we also tell countries to take on ambitious climate targets. Because when you trade under Article 6, you have to make a corresponding adjustment [so that the emissions reductions sold are not double-counted by the seller]. But if you have set an ambitious climate target, this adjustment will cost you money because you have to slash emissions elsewhere in your economy.

So there’s a real model here to get the voluntary market to play a constructive role, where they help to crowd in investment to address problems where governments do not have the resources to do so. Many times governments need to feed their population, tend to healthcare, housing, climate disasters…and now we tell them you need to tighten the screws on your economy? That is a pretty tough call.

I think the corresponding commitment could be an incredibly powerful tool to help governments use carbon finance in a thoughtful and constructive way to meet the challenges of the future.

Last one – how do you see the state of carbon markets today, and where are they headed?

I always hesitate with these because I don’t pretend to have a crystal ball.

What I can say is that the market is going through a fairly important transition right now. You have some important initiatives, such as the Integrity Council for Voluntary Carbon Markets (ICVCM). With that, you’ll start to see a more mature carbon market.

I’m certainly very proud of everything I accomplished at Verra. But for whatever reason, the market evolved as it did. I think there was a profusion of different opportunities, and it’s time to start consolidating the market, which is what the ICVCM is going to do. I was always a very big supporter of the council. You’re already seeing certifiers tighten their methodologies to meet ICVCM’s requirements, and this will start to bring confidence to the supply side of things.

Initiatives like the Voluntary Carbon Market Initiative (VCMI) are critical as well, for looking at the demand side of things – what can companies do, and say when they purchase carbon credits.

Frankly we should have had these 10 years ago, but the market then was peanuts. Nobody really cared about it except for me and a few other crazy folks who stuck it out and felt there was something there. Be that as it may, we now have these institutions that are starting to bring the kind of confidence to the market that it really needs.

So I think the market is going to stabilise. Is that enough? I don’t think so. It leaves open the question of what happens at the end of carbon projects, and I strongly believe we need to find a fix for that.

If not, we might look back in 20 years and ask, what did we achieve? We achieved a bunch of really cool projects, but that’s all it was – a bunch of cool projects. We didn’t achieve the transformation the world needs.

I think we can create a better narrative. Right now the market starts and ends with the tonne. Its all about compensating for emissions. That’s fine, but I think a much better debate would be whether we managed to transform a sector. I’d love to debate about the PTP for various sectors, as opposed to diving into each individual project. I’d rather have a bigger, broader debate about what we’re trying to achieve.

I’m not saying we don’t need to address the accounting side of things. But we are starting to see more data transparency in demonstrating emissions reductions and accounting. So between these factors, there really is a real opportunity to be thinking ahead and using carbon finance as a proper transition tool.

The transcript has been edited for brevity and clarity.