by Permian Global

November 30, 2023

Welcome to another episode of The Permian Podcast. Our guest today is Dr. Leonardo Saenz, technical officer at Permian Global, whose passion and expertise lie in the field of ecosystem services quantification and valuation, including carbon based nature based solutions, including the theory of scarce natural resources applied issues like the value of carbon credit vintages. Leo, welcome to the show!

Leo: Thanks for having me Mike!! It’s a pleasure to be here and to discuss a topic that is very close to my heart.

Mike: Absolutely, and we’re thrilled to have you. Now, before we delve into the world of carbon credit vintages, could you share a bit about your background and your journey into this field?

Leo: Absolutely Mike!

I’ve always been interested in environmental issues and how they intersect with economics and business.

So, when I graduated from university in my native Colombia I started my career working in natural resource management, and it became clear to me that in order to make a real impact for the sustainability of modern society, we really needed to start quantifying the value of ecosystem services – things like carbon sequestration, water filtration and biodiversity protection, because we take them for granted and they’re being increasingly over used, while the available resources for the protection of ecosystems are often very limited.

So, I shifted my career from purely working on environmental engineering designs to focusing on research and advocacy around these issues. Then I had the opportunity to move into postgraduate studies, and I did a MSc and PhD, at kings college London, where I collaborated with a well-known English scientist who has significant experience measuring water services from cloud forests ecosystem services in Colombia and the Andes at large. His name is Mark Mulligan, and he is still a professor at KCL.

So with him, I focused my research in finding ways to quantify the value of those water services coming from cloud forests and we used hydroelectricity as a proxy and therefore the theory of scarce resources, as the kw/hour goes up in price when there is water scarcity.

So then I got exposed to carbon services when I worked for Conservation international, and Permian Global has given me the opportunity to dive deeper into their better appraisal. So, I realized that the same theory of scarce resources can be applied to recognizing the value of forests and the carbon that they hold. And it became apparent to me that – indistinctively of the year in which a credit was generated – they should go up in price as long as they came from high quality projects in areas under significant threat, since the carbon stored in those trees is becoming a significantly scarce resource due to deforestation and degradation.

It has been an exciting and rewarding journey, and I’m delighted to share what I’ve learned with your listeners.

Mike: Fascinating! Let’s start by defining what carbon credit vintages are for our listeners who might be new to this concept

Leo: Certainly Mike.

Carbon credit vintages are like a stamp of authenticity for carbon credits, signaling the year that they were generated through a carbon reduction project. It reflects the quality and credibility of the credit and helps standards, registries, and individuals track the progress of emissions reductions and investments in sustainability projects.These credits are a tangible representation of a specific quantity of emissions reductions that occurred in a given year, making them a valuable tool for tracking and accounting for progress towards climate goals.

Mike: And how does the theory of scarce resources tie into this? Particularly in the context of the carbon trapped in forests?

Leo: Great question Mike.

The theory of scarce resources highlights the dwindling supply of critical resources like pristine forests and the irreplaceable carbon they hold. These resources are not only valuable in themselves, but also essential for combating climate change. Protecting and investing in these forests is like investing in real estate on the Miami coastline – the value is only going up.

By prioritizing conservation and investing in these ecosystems, we can help mitigate the effects of climate change and ensure a more sustainable future for all.However, there’s an outdated idea that older carbon credits are less valuable, but the reality is that mature credits coming from high quality NBS projects are often more effective at reducing greenhouse gas emissions.

It’s like wine – an older vintage is often more refined and has a richer character.

Likewise, an older carbon credit that comes from a high quality project that’s already demonstrated its ability to reduce emissions and has a longer track record of positive impact should be very valuable as they are more reliable. Plus, it has already mitigated emissions for longer, which means it has already had a greater impact on reducing atmospheric warming. It’s like investing in a vintage stock – the longer it has been around, the more likely it is to be stable and reliable

Mike: So, the protection and restoration of forest ecosystems, like the tropical forests you studied, are vital not just for biodiversity but also for managing our carbon footprint. How do carbon credit vintages play a role in supporting these efforts?

Leo: Certainly Mike.

Yeah, that’s the beauty of carbon credit vintages.

By supporting mature, high-quality projects, investors are sending a clear message: sustainability pays.

By generating demand for mature carbon credits from these projects, it helps to ensure that these projects remain financially viable and sustainable in the long run.It’s like giving a high-five to those pioneers who took the risk and started early on, paving the way for others to follow. And let’s not forget, investing in mature carbon credits can actually help these projects grow and scale, leading to even more positive impacts for the environment and the communities that depend on it.

Mike: It’s incredible how interconnected everything is. Now, thinking about your specific focus on tropical forest ecosystems, what makes them particularly significant in the context of carbon storage and ecosystem services?

Leo: Yes, that’s definitely true.

Tropical forests are like the epicenter of biodiversity, housing more species of plants and animals than any other ecosystem on earth.

These forests not only store and sequester carbon, but also provide essential services like regulating the water cycle, cleaning the air and water, and stabilizing the climate.

Deforestation in these areas though, is one of the leading causes of global carbon emissions, bearing in mind that between 15% and 20% of global emissions are directly related to deforestation of tropical forests. making their protection and restoration critical to the fight against climate change.

So, in other words, protecting tropical forests is like investing in nature’s superhero squad – they’re the ultimate nature-based solution!

Mike: That’s truly eye-opening. As we wrap up, Leo, what do you see as the future of carbon credit vintages and the protection of forest ecosystems? Any hopeful messages for our listeners?

Leo: Of course, Mike

The future of mature carbon credits lies in recognizing the true value of natural ecosystems and using technology to improve our understanding and quantification of the carbon services that those ecosystems provide.

By doing so, we can build trust in the carbon credit market and incentivize the protection of nature, by purchasing mature carbon credits from high-quality projects that have demonstrated additionality, operational excellence, including the use of adequate safeguards, as well as permanence.

This approach will not only mitigate climate change but also create a healthier planet for biodiversity and the local communities that depend on those forests and for our future generations. It’s about understanding that the well-being of people and the environment are intimately linked, and that we all have a stake in protecting it. Together, we can make a difference!

Mike: Well said, Leo. Thank you so much for joining us today and shedding light on the importance of carbon credit vintages and the theory of scarce resources, especially in the context of forest ecosystems. We’ll be making your vintages paper available to download alongside the podcast on the Permian website and our LinkedIn and Twitter (X) platforms.

Leo: Thank you, Mike. It’s been a pleasure.

To read Dr. Saenz’ paper on carbon credit vintages download HERE

To read David Stone’s article on carbon credit vintages click HERE

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