Bottled up in a VCM jam? Try insetting
A different product class for those sandwiched between a rock and a hard place in CDR
I like jam. It’s delicious and an excellent complement to peanut butter. Plus, since strawberries and blueberries in jam are fruits, it counts as one of the four food groups, amirite?
But…being ‘jammed up’ is not good - which could describe Voluntary markets for carbon removal credits at the moment: many suppliers are stuck with a challenging value proposition for the price, technical risk, and difficulties branching out from a limited set of initial buyers for offsets - which is how carbon removal credits are classified per the Oxford Offsetting Principles.
That’s why I’m considering insetting here - as opposed to offsetting - and how that practice provides a way out of said jam. Many carbon removal suppliers are not as familiar with how that process works; for that audience, I am offering a some thoughts on a definition of insetting, why it merits consideration as a path forward, and reasons to pursue sooner rather than later.
What is insetting and how is that different from offsetting?
First, the working definition of insetting I’ll use here refers to a company - usually a larger one - bringing a carbon removing activity into its own supply chain (i.e. setting it in) rather than contracting with an external supplier to purchase carbon removal credits as an offset to emissions. For insetting, the company brings these activities in-house and then accounts for them in their own emissions reporting. For those who want to dive in further, here’s a link to a Beginners Guide to Insetting by the 3Degrees consultancy, and an excellent post by the always brilliant Peter Olivier.
Two paths for an insetter to account for the activity: coupled to the supply chain of a particular product, or decoupled and attributed to general company operations - sharing this 2x2 matrix by Tristan Springer at CarbonPilot (thanks for letting me share!). We’ll get to the accredited vs nonaccredited distinctions (and MRV) further below.
For coupled activities, here are some examples of insetting for specific industrial processes:
Agricultural supply chain integration seems a step that would unleash the climate impact of this method of storing carbon and enable an insetting company to improve its bottom line. While the carbon removal potential of biochar or spreading rock dust are widely studied, farmers who already use industrial fertilizers are reluctant to adopt these practices - to the point that the glut of the physical biochar is a major problem for biochar producers. A large agricultural company could use biochar or enhanced rock weathering application as not just a soil additive but a fertilizer sparing material (NOTE: not wholesale substituting). Large growers with Scope 3 emissions targets - particularly arid regions where water is most crucial – could inset biochar to a supply chain, which would spare water and . First target could be high value crops – apples, blueberries, strawberries (all of which make excellent jam…)
Uncoupled products can have an impact on a corporate value chain as well. As US Biochar Initiative Program Director Myles Gray indicated in a recent Nori “Carbon Removal Newsroom” podcast, “decoupled biochar that is physical biochar sold without its carbon credit, which is the norm, can be considered a “zero carbon” product in value chain emissions counting frameworks. Because you’ve already counted all of the emissions from it - you’ve sold off the negative attributes, that is the removal attributes - and you’re left with zero.”
In building materials, concrete and asphalt production are prime candidates. Many, many, (many!) view insetting in concrete production as a method for achieving Net Zero in the supply chain for concrete deliveries. Adding CO2 from DAC, or biochar, to concrete would be a way of doing so, leaving the concrete purchaser to buy both a carbon credit and the physical product itself. To say nothing of the work that Carbon Upcycling Technologies has done to pioneer consumer products; the real estate industry could also have an interest insetting as part of emissions related to the build environment.
What about MRV?1 The Monitoring Reporting and Verification burden would fall on the insetter to track, leading to a situation where that entity would be both the carbon remover and reporter of the results - creating a problem of misaligned incentives. The insetter could use external consultant would analyze the activities and account for the carbon removal - with verifiers and auditors to that process - creating credible reporting in ESG statements that cover Scope 3 emissions.
Registries can use insetting to their advantage. Though most registries at the time of this writing only consider offsets rather than insets, the opportunity to track insets for reporting offers another service to a company removing atmospheric greenhouse gas. Verra is starting to look into this, but it’s early days still. This means that a registry that creates mirror protocols for insetting and offsetting activities would be able to create additional volume of credits sold.
And opportunity abounds: if an insetter uses a registry for insetting and removes a surplus CO2 that covers their own targets, the extra quantity of CO2 removed could become an offset to sell. Noteworthy that per the International Biochar Initiative/US Biochar Initiative 2023 market report, about half of biochar activities are not registered for carbon credits, suggesting that unregistered carbon removal is already happening without being tracked (insert tree-falling-in-forest riddle here).
What about financial additionality? Pure insetting gets around this challenge since it is the activity of removing tons that would get validated and thus marked on the insetter’s value chain emissions. without having to go through obtaining . If a company emits 1,000 tons and removes 200 of them through an internal project, additionality is implied: if not for the company’s desire to integrate into operations, they would not have done so. The activity happened! There’s 200 less tons of CO2 floating around!
What does this mean for those developing CDR solutions? Put simply, it’s a way around sometimes-skittish Voluntary Carbon Markets, provides opportunity to deploy technologies in a smoother fashion. An insetting company with a more robust balance sheet than a CDR startup has the ability to procure capital more easily than a startup would that is pursuing offsetting credits. The trick is to get an insetter to buy in to the tech solution itself, assuming that it has a place in their supply chain.
In our AirMiners events, we have explored a wide range of MRV solutions over the last 18 months, many of which can be adapted to insetting. A global brand keen to undertake insetting for reduced cost purposes could employ any of the MRV approaches discussed there so that they could improve their bottom line – even without selling carbon credits.
Why now? In a world where the benefits of carbon removal might be unclear to sustainability officers relative to historical avoidance offsets, or renewable energy offsets, insetting offers a path forward. (Example CFO and Chief Sustainability Officer conversation: “Yeah I hear you about our company’s Net Zero target, but a ton is a ton is a ton dammit – why are we going to buy a ton at $300 when we can get the same for $3??”) Insetting offers a way around that objection by offering value in a more profound way to executives at organizations who are mindful of their shareholders, board concerns, and CEO desires to make their companies (and jobs) financially viable.
To the above concern, if an insetting project offers value to the insetter greater than its cost of creating (CAPEX) and operating (OPEX) – or otherwise finds a way to clear internal hurdle rates for capital and operational spend –that could get greenlighted. For coupled insetting that makes product manufacturing better/faster/cheaper, the conversation becomes easier for a Chief Operations Officer - in addition to a Sustainability executive - to get on board as well rather than viewing the carbon removal activity as an expense only.
This would be true for a company with an internal carbon tax that offers a source of funding for these types of operations; there is also Beyond Value Chain Mitigation potential here - more on that in a later post.
In the end, insetting offers an opportunity for scaling carbon removal as a pathway remove the first billion tons of CO2 from the atmosphere – sooner than any might think possible. The climate and financial benefits suggest that it is a so far unheralded option that deserves more attention so that companies supplying carbon removal project solutions to insetters can survive a sometimes rocky Voluntary Carbon Market.
Then we can all afford to buy more yummy jam!
Onwards!
-Jason
PS: Thank you to Tristan Springer at CarbonPilot for guidance on insetting for this post.
Views expressed in this writing are my own and do not represent the position of any employer.
Let me know your thoughts on this post below! Since it is early days for the ‘Climagination’ Substack, any and all comments are welcome - content, formatting, style - it’s all fair game in service of the readership.
Personal note: this wouldn’t truly be a carbon removal post without talking about MRV, now would it?