Explainer: Avoidance, issuance and carbon revenue

By Jo Anderson and Marc Baker

We don’t deny that there’s a lot of jargon in the voluntary carbon market. To help you understand the complexities of carbon crediting, we sat down to explain some key elements of carbon credit supply. How does Carbon Tanzania know how many carbon credits it can sell? How is revenue shared with local people? And what does Tanzanian law mean for our social enterprise? Find out below.

Key terms

Q&A

Could you explain how carbon credits are issued based on the conservation work of your community partners?

The issuance process determines how many carbon credits a project developer like us can sell. The number of credits issued to our projects varies annually because carbon credits are a natural asset. 

This means that the number of carbon credits issued depends on the success of our land management. Every year, thanks to the efforts of our community partners, we report carbon emission reductions from each of our projects. However, the volume of these reductions changes year-on-year.

At Carbon Tanzania, we run our projects from May until May. During this time, our community partners conserve the local ecosystem and monitor these forests for signs of illegal logging and poaching.

Based on this monitoring, Carbon Tanzania creates a database. This involves constant communications with communities as very often they are first to spot signs of illegal activities. From this database, we create a monitoring report which, along with climate data from Terracarbon, is then submitted to Verra and Plan Vivo.

Issuance is subject to third-party audit. We use a validation and verification body (VVB) to audit our projects against the Plan Vivo and Verra standards  –  they visit our projects in person. This process confirms that the carbon emission reductions specified in our monitoring report have been made and that local people are receiving their share of the revenue. Following these visits, the auditors submit a report to Verra or Plan Vivo to confirm their on-the-ground findings. It generally takes 18 months from the beginning of the verification audit to reach credit issuance. 

For our VCS certified projects, we have chosen to be verified by third-party auditors every year. This is above and beyond what is required by the standard which specifies project developers must be verified every five years. It costs to be verified which is one reason why it might not be the right approach for every project developer. There’s no one size to fit all, but for Carbon Tanzania annual verification is the right approach.

How does Carbon Tanzania conserve and monitor its forests?

Village governments have a legal mandate to protect their forests so local people take the lead on ecosystem conservation in Carbon Tanzania’s designated project areas. Many of these areas are remote with limited road access making it easy for people to spot unknown vehicles when they pass through. If people in the villages notice anything untoward, they report it to their village government of management authority. They also notify Carbon Tanzania via the Village Game Scouts (VGS)

We use revenue from the sale of carbon credits to train and employ VGS to monitor our conservation zones. They collect data on walking patrols which is uploaded straight to the cloud. 

Poaching and deforestation are both seasonal activities, tending to occur at the end of the dry season. VGS check for signs of poaching, agricultural expansion and deforestation on their patrols, meaning that illegal activities are caught quickly and early.

Some years, more credits are issued from Carbon Tanzania’s projects than it sells. Can you explain why this can happen?

Credits can sit in the ‘warehouse’. Carbon credits are issued following the third-party audit. The issued credits sit in a public registry (think warehouse) before they are sold.

Our issuance figure will match our credit sales if we have a contract with a buyer or intermediary for all of our credit ‘harvest’. But if only a portion of our credits are covered by a contract, the remainder will sit in the registry until a buyer is found. 

Credits sometimes stay in the registry for more than one year, meaning that the annual figures sometimes do not line up.

What are buffer pools? And how do buffer pools reduce the number of credits issued to a project?

Buffer pools (often known as ‘buffer’) capture both national, and project-level, risk. Of the credits issued to our projects, between 15 and 20 percent are set aside. This means we do not sell them to carbon credit buyers.

The buffer pool credits are retained by Verra or Plan Vivo. For example, if there is a forest fire and some of the conserved trees are lost or if some illegal deforestation takes place in the conservation zone our buffer pool credits can be used to account for the loss.
As well as the buffer pool, another portion of our issued carbon credits are set aside. This additional pool protects us against any potential leakage (when illegal deforestation activities do not cease, but move to another location outside of our conservation area). When taken together, this means that close to 30 percent of our issued credits are set aside to cover potential losses. Carbon Tanzania is conservative in its issuance.

Since November 2023, Tanzania has implemented a 61 percent revenue-sharing regulation. Has this impacted Carbon Tanzania?

Carbon Tanzania works closely with the Government agencies in Tanzania that have oversight of climate change and management of carbon projects. As one of the stakeholders involved in developing these regulations, we ensured that our district government officials were able to share their experiences. 

For us, it is clearly right that local people who lead on conserving Tanzania’s forests receive the majority of the finance generated. Naturally, Carbon Tanzania supports these new regulations for they protect the rights of local communities and direct finance to nature.

How long does it take for carbon revenue to reach people on the ground?

At Carbon Tanzania, we share revenue with local people every six months. You might wonder why we adopted this biannual approach. Why not just share revenue as soon as it is received?

There are both legal and practical reasons to manage the process. You can’t just dump revenue into a big metaphorical bucket. It has to meet the rigour of Tanzania’s rules and regulation. 

Carbon Tanzania works with the President’s Office and District Government to support local people develop spending plans for carbon revenue. This takes time, for spending is decided inline with community priorities and we need to give time for people to voice their opinions.

Could you share an example of the revenue spending allocation process?

As they are anywhere in the world, health and education are the top priorities for most people in Tanzania. However, these two pillars manifest differently in each community. Sometimes a village wants to invest in primary education. Others have a greater need to support university fees.

To date, carbon revenue has been used to fund infrastructure projects including dorms, offices and maternity wards. In one of our projects – Makame Savannah – many girls weren’t going to school. You might assume this imbalance was due to gender stereotypes, but actually, families were scared for their daughters’ safety on long commutes to school. 

After these concerns were raised in community meetings, it was decided that carbon revenue from the Makame Savannah project would be used to build dormitories. Now, girls can spend the night at school so they don’t need to travel back and forth. This makes their families more confident that they are safe to attend school.