Transcript Episode 4: Dr. Ben Probst - Can We Trust Carbon Offsets? Evidence from 1 Billion Credits

Arvid Viaene: Dr. Ben Probst is an environmental economist and the head of the Net Zero Lab at the Max Planck Institute for Innovation and Competition in Munich. His research focuses on accelerating climate technologies, and he's also affiliated with the Cambridge University and ETH Zurich. Ben holds a PhD from University of Cambridge and has worked with organizations the World Bank and the German Development Bank. So Ben, welcome to the podcast.

Ben Probst: Thanks for having me.

Arvid Viaene: I am very excited about our conversation. And for the listeners, I came across a post that you made on LinkedIn about your research on carbon credit offsets. And I found the results quite interesting, which we'll talk about. Could you just give a quick explanation of what these carbon credit offsets are and why they are used?

Ben Probst: Yeah, so carbon credits are typically generated by voluntary project initiatives. These could be reduced emissions from deforestation in the Amazon or fuel-efficient cookstoves in Kenya.

These projects reduce emissions, and then they produce certificates, which essentially to say this certificate make sure that one ton of CO2 was reduced or removed from the atmosphere.

Ben Probst: Then others use it often to offset their emissions or part of their emissions. So a car company in Europe could say, well, we buy several tons or many, manyso thousands of tons of carbon credits from certain projects to make this one model that we sell carbon neutral.

There are a lot of problems about these claims, but this is so this the basic setup. You pay someone else to reduce or remove emissions, and then you make claims that you've essentially done it because you've paid that person or that project.

Arvid Viaene: Got it. So it's both reductions and then also maybe the avoidance of future emissions. So both can be included in these.

Ben Probst: That's right. So the reduction is really you have a pollution stream and you're reducing that. Avoidance is often more hypothetical. You think that a certain land would be chopped down and so you save it. Yeah, we're already getting into the complexities of this the sector.

Yeah, there's avoidance, there's removal, and there's also reduction. The removal part is really drawing down CO2 from the atmosphere.

Arvid Viaene: Got it. And then what got you interested in the topic of studying these carbon credits?

Ben Probst: I've been interested in a range of topics around carbon credit. So my first paper was on really trying to understand how effective deforestation policies are within the Brazilian Amazon.

Turns out this is one of the bigger project categories withincarbon offset markets is reducing deforestation. I was also quite interested in renewable energy and how you can actually deploy it at scale globally.

Another big project category are renewable energy offsets. And then... These interests came together as I saw that quite a lot of companies were making carbon neutrality claims. So whenever you walk into a supermarket, you can see a range of products claiming that they're carbon neutral.

So I was really curious to understand what's behind that. And so I started looking deeper into the literature and it became quite clear that many claims didn't hold what they were claiming to do.

Arvid Viaene: Yeah. And one thing I got, we're getting to your paper now, but so this originally developed with the Kyoto Agreement where there was some room for these carbon credit offsets where people could, use them.

Then there a new mechanism in the Paris Agreement. But what I found striking is in this In total, it's about 6 billion credits, I think, that were issued. Then you in your paper, which tackles some of these, you discuss around a billion of these. Is that the correct interpretation?

Ben Probst: Yeah so it's it's roughly five gigatons, so five billion, and we cover around a billion ton of credits. So it's it's it's quite a large market.

Perhaps to to briefly explain the history, you've already alluded to it. So it actually emanated in as a voluntary approach. You had this American company, and they were building a new power plant. And the CEO came to one of the employees and said, well, I think climate change could be real. Remember these, the 80s and said, how could we, how could we compensate these emissions? So they toyed around with a lot of ideas capturing the carbon and using it to make fizzy drinks. Then they realized they have far too much carbon to actually fill all the bottles that they needed to.

They thought about putting it at the bottom of the ocean, the captured CO2.

Arvid Viaene: Yeah.O kay.

Ben Probst: Then someone came up with the idea of planting forests because forests suck CO2 out of the atmosphere. So they wanted to do it close to the plant, but then they realized they don't have the space to do it. So they did it in South America.

Arvid Viaene: Yeah.

Ben Probst: So the first carbon offset project was born. Turned out that the project itself only captured a fraction of what it intended to capture, which already shows a few of the basic problems.

The original idea was very new then. And so it got picked up later within the Kyoto Protocol, which had two flexibility mechanisms. They were called the Clean Development Mechanism and Joint Implementation, which essentially meant that for those countries that didn't have binding climate targets, they could still do climate mitigation and then sell these credits to countries that actually had a binding climate target.

Arvid Viaene: Yeah.

Ben Probst: Germany could buy credits from the global south and count it towards its own emission reductions. That'sthe basic setup. And that has this sense essentially now been in place since the early 2000s, the CDM and joint implementation.

As you said, now under the Paris agreement, we have essentially a similar mechanism to the clean development mechanism. Now it's a bit different because essentially everyone has a target, they're voluntary targets, but these credits are supposed to help countries achieve an even more ambitious version of their climate target. That can then be sold to other countries.

Arvid Viaene: That was interesting, exactly. I didn't know that story, but it is a good summary. Could you maybe also talk about who who organizes the carbon credit offset markets? Because it's a mix as I understand it.

Ben Probst: Yeah, so there are three different layers and it gets complex very fast. But the first one is really the private market, which is often called the voluntary carbon market, which is essentially it is typically private project developers who sell carbon credits to other buyers, companies, for instance. Then you have what's called the quasi-compliance markets. These are markets that are often organized by international organizations. So the CDM, for instance, is organized by the United Nations.

There you often have buyers from the public sphere, so countries. But then the credits from these two first markets, the private market and this quasi-compliance market, they can end up in compliance schemes the European Emissions Trading Scheme.

Which bought quite a lot of these credits from the clean development mechanism. So in total, around 1 billion tons from the CDM and joint implementation ended up within Europe's domestic scheme.

They often originate within the private market or this quasi-compliance market, but then they get even bought by these compliance schemes as in Europe in the emissions trading scheme. So you have a range of different layers essentially and different organizations that are engaged in these markets.

Arvid Viaene: Exactly. And so, which then makes sense that you would want them in the compliance markets because the carbon price is now at €80, €100. It's quite high if you want to emit one more ton of CO2. If you can get it from some other market and get certified, then that's a very attractive proposition.

Arvid Viaene: To include them, which, because for a while they were excluded, I think, from the EU ETS just completely, or was it just some parts of it?

Ben Probst: Yeah. So, they were included at the beginning, but then around 2013, they really limited the eligibility of carbon credits from international projects, mainly due to quality concerns. It was really depressing the market price within EU ETS. But generally, the idea is that these credits are much cheaper. So they're it's quite efficient, in theory, to use credits you're essentially doing emission reductions where it's cheapest globally.

I think many people have not considered that in many places in the global South, the institutions are often weak. And so it's really hard to make sure that these projects deliver what they claim to do. We can get into the specific problems, but what seems very cheap on paper doesn't often deliver what it claims to have achieved. And so when the EU ETS really reduced its intake of these credits, the prices within the clean development mechanism collapsed. And so a lot of projects were canceled in the wake of that.

Arvid Viaene: Which makes sense because then the EU ETS was just a high driver of demand for these projects.

Ben Probst: Mm hmm.

Arvid Viaene: I think that's useful history also for me to interpret some of your results. And then maybe we can just get into some of the results of your paper. Because then, could you maybe then just describe what you set out to do in your paper and how you went about it? Because I think it's a very interesting exercise that you did.

Ben Probst: Yeah So this is a paper where we got together many of the leading scholars within the carbon credit field. So I didn't do this alone. We did this in a team of 11 scholars globally. So we have people in the States, but also in Europe and other places. The general idea was to really bring together all the evidence we have on the effectiveness of carbon credits. And try to synthesize the results.

Ben Probst: To give you a bit of backstory, there were a number of different papers looking at different project types. So there were studies looking at avoided deforestation. There were others looking at cook stoves.

Ben Probst: Then you had projects, then you had studies looking at renewable energy. And they were all quite disparate literatures. And so what we tried to do is bring them together and find one metric to make them comparable and just say, well, this is what we know within the academic literature on this topic.

Because what's often been said is, well, look, this is just one study looking at a few projects. What can we really learn from that? And so what we wanted to do is say, no, that's not correct. There are a lot of studies showing very similar things.

So we looked essentially at every study that we could find that had a credible control group and bring them together and synthesize the results.

Arvid Viaene: Yeah. So, so one of the contributions as I'm hearing it is instead of looking at one or two areas or one or two studies, you just looked at synthesising all the evidence out there. So you could address the claim that is just, oh, this isn't representative.

Ben Probst: Hmm. Exactly.

Arvid Viaene: Then how did you go about this? Because I feel it was quite a framework that you used to systematically use the studies that you used. Could you discuss this more?

Ben Probst: Yeah. So we started with keywords to identify the relevant studies, but it turns out that gave us around 60,000 potentially relevant studies and of course, it would have been hard to screen manually.

Arvid Viaene: 60,000 is a lot.

Ben Probst: We used AS review, which is essentially a machine learning priorities prioritization tools. So you train the model on relevant abstracts. And so it gives you similar studies. And so your Samsung don't screen 60,000 studies, but perhaps 10,000 studies. And so and so This is still a lot, but it's it's much easier to do it that way.

Then once we had that study, the D&D studies, we used the so-called PICO framework. , you do this at the beginning, but this PICO framework is and essentially is you think about what's your population, what's your intervention, what's your comparator, and what is your outcome?

The population we were interested in were essentially all carbon crediting projects that had been done and for which we could find literature. And that's also the intervention. So in our case, that's the same.

Then you want a comparator, which essentially means if you're trying to protect forest, you're not just looking at the protected area, but you're also creating a credible counterfactual area that was not protected by the forest. Because it could be that you're protecting some forest, but for reasons other than your project intervention, deforestation goes down. For instance, there's a new environmental law that reduces deforestation or demand for beef goes down. And so it's important to have these comparators.

Then you essentially look at the outcome and the outcome for us was how much CO2 was saved by the project. And that's important because a lot of these studies have different outcome variables. Some look at avoided deforestation in hectares, others look at it in terms of CO2. And so what we were trying to do is find a metric to compare them all. And so we tried to really figure out what the reduced CO2 was by these projects compared to a credible control group.

Then compared that number to what had been issued in terms of carbon credits. And we call that the offset achievement ratio, which just means if you had issued, a hundred credits and you achieved, or you just achieved 50 of them, then that would be an offset achievement ratio of 50%. So that gave us one number to compare all these different project categories to each other.

Arvid Viaene: Exactly. If it's 100%, it just means everything you promised has actually been achieved. If it's zero, it means you had no success whatsoever.

Ben Probst: Exactly. It could, you know in theory, it could also be 150. So you're overachieving.

Arvid Viaene: True.

Ben Probst: We see some projects where that happened, but the majority didn't achieve what they'd claimed that they would.

Arvid Viaene: Yeah, so do you want to then maybe just give the general overview and results of the paper?

Ben Probst: Yeah, so we looked at around a billion tons of carbon credits that had been issued. And what we find is that less than 16% of these carbon credits constitute real emission reductions.

Less than 16%. It could be lower than that 16% because we couldn't even look at all the different reasons why these numbers might be inflated. Just looking at the criteria that we could identify, we estimate it's less than 16%. And then we find different offset achievement ratios for different sectors.

The sector with the highest achievement ratio in our analysis is HFC 23 abatement. That's a chemical, essentially a byproduct in the chemical industry. And if you try to reduce that, that has quitewhich has quite a potent climate effect,

There's often not a business case for it. And so they have quite high achievement ratios. Then for avoided deforestation, which is quite a prominent project category, was around 25%, we estimate. And then and If you take cook stoves, we estimate it's around 11%.

What I should say, it's it's only for projects that were covered within the literature that we can make this claim for. There might be many other projects within that project categories that this number doesn't apply to. So we can only make this claim for the projects we have good evidence for.

Arvid Viaene: Which is that I do think one of the impressive points is the coverage you said is 1 billion. And you said, there's about 5 billion of these credits. So you've covered 20% of all issued credits, which I think is a substantial amount.

So then we can dive into the some of these in more detail because I think showing people some of this could illustrate some of the challenges. I think so the biggest ones in terms of overall credits issued were renewables. Could you then maybe talk about that category and what went on there?

Ben Probst: Yeah, so within the clean development mechanism, there was a push to develop wind energy, which of course in itself is a very noble goal andimportant to pursue. The basic theory of change is that with the sale of carbon credits, you make a project financially viable. So let's say you want to build a wind power plant in India.

Within the existing power market, you sell power to the grid. You can't make it work. It's just not financially viable. And so the theory is with a top-up you get from selling carbon credits, you go to the bank and say, look, we got now...

We think we can sell the following amount of carbon credits at a certain price, and now it becomes financially viable.

It's called additionality. So you're making additional projects viable and via the sale of carbon credits. After my PhD, I worked a bit in renewable energy finance, and from experience, I can tell you this is bogus.

There might be cases where this worked, but no bank worked. Or at least to my knowledge, no bank will so say, okay, you have volatile prices and with this new technology, you have no idea how many carbon credits you will be able to sell. And because of this very questionable promise, we now give you millions of dollars, that is probably not going to happen.

What a lot of studies or what these two studies that but that we have in the review show is that many of these projects were financially viable, even without carbon credits.

To me, that makes a lot of sense because it was probably nice to get some additional revenue from carbon credits or potential revenue, but you had no idea where their carbon price would go.

For the CDM, it crashed very quickly. And some people might've expected that. And the carbon prices were quite low, which means you have low revenues and very volatile prices, which if you run a financial model as a bank, should not make a huge difference to your financing decision.

So, within the studies we have, we find no statistically significant effect on additional renewable energy plants or wind power plants being built, at least for the CDM projects withinChina and India.

Arvid Viaene: And as I understand it, one of the key features in this subset is the high capital requirements to build these wind turbines. The one thing I didn't see was solar, because I imagine solar is less capital-intensive. Is there something there that because solar is less capital intensive, it could be a higher additionality?

Ben Probst: So solar and wind, if you think about sort the timeframe, that's late 2000s, early solar and wind both were quite expensive.

If you compare renewable energy technologies to, let's say, fossil fuel-based alternatives, they have very high upfront costs. Because once you run them, the inputs or the OPECs are essentially zero.

You have a bit of maintenance, but if you have a of a gas-fired power plant, you need a lot of fuel to actually run the plant All of the financing needs to come essentially at the beginning. And so they're they're both, solar and wind and re renewable energy more generally are quite capital intensive. And so I think for both of these project categori categories, it's it's it's very unlikely that this would have made a big difference in my view.

Arvid Viaene: So I saw that you mentioned in your paper, wind was taken out of most of these carbon crediting mechanisms because you say, it was recognized to some extent that there's no additionality. You're not actually sure these would have otherwise happened anyway. Then some of these crediting organisations did bring them back in, which, which presents an interesting puzzle. Could you speak to that

Ben Probst: Yeah, perhaps one point on this. So I think it's quite instructive to look at what actually led to the deployment of renewable energy. So take Germany, for instance, one of the biggest markets for solar in the 2000s. What really drove the deployment there were feed-in tariffs. Which essentially meant you have a high price guaranteed for your deployment for a fixed amount of time, typically 20 years. That led to a lot of deployment. Now, carbon credits are exactly the opposite. They're not fixed prices, they're extremely volatile prices, and they're not over a long timeframe, which you can calculate with, but it probably varies quite a lot over time.

So on both dimensions, carbon credits are much less attractive than feed-in tariffs, which led to a lot of deployment of renewable energy. And I think that's just important to think through why perhaps the additionality of these projects and wasn't that high.

Perhaps one other thing we say in the paper that we didn't find statistically significant effects. There might be effects, but, you , they're so small that we can't really see them.

Arvid Viaene: Yeah

Ben Probst: So we don't know whether it's zero, but it's it's probably somewhere around that.

Arvid Viaene: Got it. Yeah. Thanks for that addition. Because it's like you say, it's just the average and then there's a whole significant uncertainty interval too. So then maybe we can move on to the forest management, which then happened in the United States mostly as I read it.

Ben Probst: Mm-hmm.

Arvid Viaene: Could you then maybe speak to that?

Ben Probst: Yeah, improved forest management is another big project category, mainly in the United States. And so we looked at credits that are that were issued under the California Air Resources Board's U.S. Forest Project Protocol.

So essentially what these projects are trying to do is that they reduce forest degradation. And again, that in itself is a very worthy goal. We're losing a lot of forest and that leads to additional emissions, biodiversity loss, and of course also the loss of income for communities.

As so often, it depends a lot on the design of the specific protocol and methodology. And so the problem with this methodology, as and studies show, it was the essential essentially adverse selection.

To calculate what these methods and forests had saved in terms of CO2, they used a very coarse baseline. So essentially the average in this region in terms of what these forests had in terms of carbon stored in the trees. And what then happened was that forest plots or projects self-selected into the system that already had higher rates of carbon in saved in these forests. So let's say the average is 100, but you have 120 in your forest, you're getting credited this 20 without doing anything. And so these credits are being issued without any additional forest protection because of the design of the system.

So that's another project category where within the existing literature, we couldn't find any evidence that this project category saved any forest despite being the largest source of credits withinCalifornia. So that is, that is mainly adverse selection. So for wind, it really is a problem of additionality. Here, it's more a problem of adverse selection.

Arvid Viaene: Yeah. So it sounds there's just an average calculated for forest in general, but then the forest benefit the most, just self-select into the program, getting credited these, these reductions that might not actually happen.

Arvid Viaene: Then could you then maybe talk about the cook stoves next and what you found there?

Ben Probst: Yeah, so for cook stoves, the basic idea is that a lot of people, especially in the global south, still use biomass for cooking. And with fuel-efficient cook stoves, you can essentially kill two birds with one stone.

You reduce emissions from burning biomass by having more fuel-efficient stoves. And it also reduces indoor air pollution, which is ahuge health hazard.

And that's really important. It's just quite tricky in the real world to measure the reduction of these different cook stove projects. And so what's been found are, I'd say, two main problems. The first one isa methodological problem.

To calculate the emissions that have been saved through burning less biomass, you have to calculate what's called or determine the fraction of non-renewable sources of fuel wood and other biomass.

If you assume that only a low fraction of biomass will naturally regrow, you're saving essentially quite a lot of carbon.

If the biomass regrows, then after some time, even if you use the biomass to cook, it will reabsorb the emissions. So what a lot of projects do is that they use very unrealistic levels of this fraction of non-renewable sources of fuel wood to make these calculations.

So what studies do within the space is essentially they use more realistic parameters to calculate it and readjust the expected emission reductions, which are much lower than what projects claim.

Then the second problem is that often, it is quite unclear how people use these cook stoves. So what but some studies find in this space is that people use not just a fuel-efficient cook stove, but also the original stove.

They might actually be burning more biomass because now they have two stoves that they have to use for cooking. And so there might be some suppressed demand that then essentially comes to the fore.

So methodologies that are being used to calculate the reductions are of different quality. There's a very good paper Vila et al. From[ED1] Berkeley. And what they essentially do is they recalculate these emission reductions based on more credible estimates of these parameters.

Arvid Viaene: Could you maybe just give a sense of what the range is or what you say more credible, what difference do what credible versus what I'm just curious to know if there's a,

Ben Probst: Yeah. So overall, recalculating it, well what we find in in this paper is that around 11% of the issued credits constitute real emission reductions. It's a huge difference to what's been claimed.

Arvid Viaene: Yeah. But because you said, for example, this percentage parameter of how much is regrown . What those projects use versus what those authors use as a more realistic percentage or not?

Ben Probst: So I would have to look at the original paper, but it depends, but it's quite context specific and depends on the type of a forest and the type of fuel you use.

Arvid Viaene: Okay. Then Yeah. We'll just.

Ben Probst: So I couldn't say the average number, but it is within recalculating, it is the most important factor that drives the difference.

Arvid Viaene: Okay. Got it. Sorry, but I interrupted you then because you were saying , so then they recalculated it with these most more realistic parameters.

Ben Probst: Right. And so what they find is that around on only 11% of what's been claimed constitute real emission reductions. So which means that also all the health effects that we would expect from lower biomass usage in cooking also wouldn't materialize. Because if you can't get the carbon benefits, you're likely also not getting the health benefits.

You have specific choices that the authors made in recalculating. They base it on the literature. You might recalculate it slightly differently and get to you know slightly different results. I think the so the overall assessment is correct. It's somewhere in this range probably.

Arvid Viaene: Got it. Because that's maybe the thing I didn't fully get is this 11% that they recalculate is relative to the 100% calculated by the organization or whatever methodology was used. So it's not going from 50 to 11.

Ben Probst: Yeah.

Arvid Viaene: It's actually this 11 versus the 100%.

Ben Probst: That's correct.

Arvid Viaene: Got it. Okay. Then maybe we can do one more, which I thought was really interesting because it's the most effective one, which you find in your study, which was these more chemical gases. Could you maybe talk to them and what could be driving that result or what could be, what's the story there?

Ben Probst: Yeah, so we looked at two different chemicals, so HFC-23 and SF-6, which are both quite potent climate gases. And so destroying them makes a lot of sense. In a lot of countries, there is no regulation to abate these gases. So they're essentially just vented to the atmosphere.

Destroying them has huge climate benefits. And so within the CDM and the joint implementation, there were a range of projects. And just to pick perhaps HFC 23. So these were projects within the CDM where HFC 23 was destroyed. And as I said, there is typically no business case to do it or local regulation. Abating these chemicals is really important, but there's one catch to that, which is what we saw in this in the studies who analyze these projects was that some of the plants actually increased the production of these waste gases because they could then essentially sell more credits.

That still leads to a reduction of emissions because after abating them, you're still emitting some CO2, but it's definitely less than the original pollutant. This perverse incentive to produce more waste gases is something that... Methodologies and program administrators have to be quite mindful of. So the methodologies were then updated, but most plans never applied these methodologies.

Arvid Viaene: Yeah, so it's but almost before the measurements start, they ramp up their production. So they have this higher baseline to start from, and then they claim the reduction of all of these to get back to whatever level they were, or even a little bit lower. Is that so the reduction itself is very efficient, but there's the potential that they were just ramping up their production before it starts.

Ben Probst: That's right.

Arvid Viaene: Not ideal if you want measure it correctly.

Ben Probst: Yeah, it's quite a depressing picture on the one hand.

At the same time, what I should also say is that of course there projects that are achieving what they claim and that they have achieved, they're a minority. Within our sample, we see it that some projectscan know achieve the promised reductions, but overall just a fraction of the sold credits constitute real emission reductions and of course that is a huge problem for mitigating climate change.

Arvid Viaene: Got it. Yeah, exactly. Yeah, there's there's an incentive to do this, but you say, some firms probably just actually do it .

Ben Probst: Mm-hmm.

Arvid Viaene: Properly, and then you get these actual reductions, which is a the goal after all. Then maybe taking astep back. So you've done this paper and now we're in this, we're now, July and the commission, the European commission has now just proposed our new regulations whereby the new topical thing is that they included a provision in their proposal that there's 3% of reductions going you going forward to 2040.

Would be feasible with these carbon credit offsets. And I think you've spoken to this, that there might be some caution to be applied there.

Could you just maybe speak to that or how you could use your results to maybe advise or know what your opinion is on these new proposals?

Ben Probst: Mm-hmm.

Ben Probst: Yeah, so to flag perhaps two important things at the beginning. So what they're proposing is using international carbon credits. So from the projects or project categori categories that we have discussed in others, and they're going against the scientific advice of their own scientific advisory board, which has cautioned against using these credits to achieve the 240 emission reduction target.

That's one. And they're going against their own climate law passed in 21, which suggested or said that the credits that can be used towards the target can only come from domestic sources. So they're essentially now backtracking these commitments and the advice from their best science advisors. And so that just so as a disclaimer. 3% doesn't sound a lot, but actually in 2040, that's around 145 million tons. And cumulatively from 2036 to 2050, this is around 1 billion tons. So we're talking about huge volumes of credits that could be used within Europe and to achieve the NDCs.

So I'm I think a lot of work needs to be done before we have enough confidence that the credits that come from international sources are actually trustworthy enough to be used towards these climate targets.

Within the EU ETS, for instance, we've discussed this before, CDM credits at some point became extremely restricted because there were such doubts about the integrity of these credits. And now the commission says, well, we just want high integrity credits, but...

At least to my mind, there hasn't been a fundamental revamping of the system itself. So I don't see why this new one, it should be fundamentally different. Yes, there have been some improvements, but I don't think we're at a point yet where we should be pursuing international credits, but we still have some way to go. So these credits proposed by the commission would be used from 2036 onwards. So we have 11 years to improve the system and perhaps make it ready the 3% rule comes to pass

Arvid Viaene: All right. Thank you for that. I think that's also, I think a very good, disclaimer observation towards the future. Is there anything you would to add to what we've discussed or results-wise that I might've missed or that you feel could use some more emphasis?

Ben Probst: Yeah, so briefly about the new crediting mechanism. So the now the new system, which is essentially coming after the clean development mechanism, is called the Paris Agreement Crediting Mechanism, PACM.

There are some bright spots, and there's some room for improvement, let's put it that way. So what's been quite promising within the system is that now we have two different markets essentially that are evolving. We have an international market called and Article 6.4. And so you have a range of countries that might be trading carbon credits. And there, the standards that we've seen so far are quite ambitious.

So they're much better than the CDM standards that we've seen before. So that is quite a promising development. Now and there are two problems. One is that there will be... Projects that transition from the clean development mechanism to this new mechanism.

The first projects we've seen have quite substantial quality problems. And so that could actually be a problem for this new market that has quite high standards. But with all this legacy that's problematic, this might dampen the market outlook for some time. Then there's also Article 6.2, which are so-called decentralised cooperative approaches, which are just these are these projects between countries.

There's no global oversight. There's not one big standard as in Article 6.4. And so within 6.2, we will probably see quite a lot of variance when it comes to the quality of the methodologies, the oversight, because that will be determined between the two countries trading the credit. So for instance, Switzerland and Ghana.

What we've seen so far is that there's not a lot of transparency, and it's quite hard to assess how good these are. So I'm quite hopeful about Article 6.4, but I am a bit more pessimistic about 6.2. This is to be seen how good this is. So all to say, with this new development, we might see some improvements, but we have to be quite watchful and quiet, you're not quite focused on the details of especially the bilateral approaches.

Arvid Viaene: Then thanks so much. I think that's actually really helpful to actually know going forward and article 6.4 sounds promising you say in terms of the direction and the standard, so and then future research is needed as they sometimes say. So thank you so much Ben I really appreciate you taking the time I learned a lot.

Ben Probst: Yeah.

Arvid Viaene: I think, as you said, one thing I think away is also more attention, more rigor. And this can be promising, but there's more rigor needed to ensure that we're getting what sometimes it's being promised.

Arvid Viaene: Thank you so much.

Ben Probst: Yeah. Thanks Arvid for having me.

Arvid Viaene: Have a great day.