Raising the standards of carbon credit schemes

Raising the standards of carbon credit schemes

Niklas Kaskeala’s job is to make life difficult for his clients. The chief impact officer of Compensate is in the frontline of the war against greenwashing, and he has no hesitation in speaking truths that some may not want to hear.

Compensate, a Finland-based company, offers businesses and individuals easy access to high quality carbon projects, helping them take responsibility for those unavoidable emissions.

In theory, a carbon credit pays for the prevention or removal of a certain amount of CO2 emissions in the atmosphere, through nature-based schemes like tree planting or industrial projects like direct air capture of CO2.

According to Kaskeala, most of these schemes, in practice, are severely flawed. He mentions that 90 per cent of projects that carbon credits fund do not meet Compensate's standards of scrutiny. “Our analysis of more than 170 top-tier projects shows that nine out of 10 don't qualify for our thresholds. We think our threshold should be the norm, and the current markets are far behind that.”

In other words, a company may report to its shareholders that it prevented a certain number of tons of CO2 being emitted by paying a certain amount for carbon credits, but if that mangrove plantation failed (80 per cent of mangroves planted in Sri Lanka between 2004 and 2015 failed), the carbon credit is on paper only: it made no actual difference to CO2 emissions.

To make things worse, companies that buy carbon credits may feel they can present themselves as ‘carbon neutral’ if their emissions match their credits. So, they may buy an increasing amount of (partially or wholly ineffective) carbon credits, and increase their actual emissions accordingly – precisely the inverse effect the carbon credit market was supposed to have.

Kaskeala’s background is as a sustainability campaigner and adviser. When he joined Compensate in 2019, it was a not-for-profit organisation in Finland; it took a well publicised campaign there for the organisation to be allowed to develop its commercial arm. 

He says he sees Compensate’s role as advising companies that want to navigate the immature and emerging carbon offset market with grounded, detailed and scientifically backed advice. “I think the projected growth of the carbon market is both very scary and also very inspiring. It’s scary in the sense that if the carbon market keeps growing with current market standards, the climate impact might be close to zero, and then we are wasting a lot of precious money and resources on something that didn't achieve global goals.”

Kaskeala asserts that there are many reasons for the current flaws in the carbon market. Apart from the many examples of failed tree and mangrove plantings, in other cases unscrupulous operators buy tracts of virgin forest, at no risk from logging, and sell it as a carbon credit. “We have seen projects sold for carbon credits in areas that are in no threat of deforestation,” he points out. Or the money paid out to a scheme may disappear into the pockets of middle people, or the technology may not work properly. A key example of failed tree planting, he says, is projects in Africa and South America that convert biodiverse savannah ecosystems into single species timber plantations. 

Nature-based schemes are regarded by many as an important way forward, because the storage of carbon in forests or coastal mangroves, when done correctly, can have numerous additional benefits for biodiversity and communities. “Mangroves contribute to climate change adaptation by improving the conditions of the coastal ecosystem and reducing the natural disaster risk from tsunamis,” he reveals. “Mangrove restoration improves biodiversity by increasing fish resources by up to 50%.” They are also the hardest type of scheme to monitor, as they often involve complex interactions with local communities. 

Kaskeala explains Compensate works in a methodical way to counteract these issues. First, through educating the wider business community that carbon credits are not all the same, and that having real impact means measuring end effect, not receiving a certificate. 

Second, sourcing and constantly monitoring carbon projects that do meet their standards. They work closely with the projects they fund, advising and giving direction where possible.

And third, working with corporate clients to spread risk. “Instead of our customers putting all their money into one or two projects, we actually give a portfolio of up to 12 projects, so the risks of something negative in one project don’t necessarily affect the overall impact on the climate,” he explains. “Having these dynamic portfolios allows us to maximise the climate impact by finding the best projects. If some projects are underperforming we can substitute them with better ones. We see ourselves like managers in that sense, in that we manage a carbon project fund.”

Kaskeala says that the company also overcompensates to ensure that there is no risk of underperformance, and clients going through his scheme are aware of this overcompensation and ready to pay a premium for this: “We work on the basis that actually two credits will represent one ton of avoided emissions.”

All of this makes carbon credits bought through Compensate more expensive than those purchased through its competitors. But there are two major drivers of business to the company, he remarks. The first is the moral factor – an increasing number of companies want to not just be seen to be doing the right thing, but actually do it. And the second is the potential of regulation and accusations of greenwashing. Compensate’s corporate clients now number in the hundreds, he adds, and they have started receiving RFPs from US tech giants, which previously they would not have expected. 

The plan is for growth but without compromise, while retaining the company’s campaigning roots. “We are not happy with just us trying to provide a service that is high,” claims Kaskeala, “we actually want to drive the market standard up.”

Biography / key highlights

Founds the Finnish affiliate of the international nonprofit Protect Our Winters 

2015 Starts as executive director of The Finnish Foundation for Media and Development

2017 Works with Save the Children Finland as an advocacy, children’s rights and business adviser

2018 Becomes the fundraising manager of Crisis Management Initiative, Helsinki

2019 Joins Compensate as CSR lead, before quickly moving up to head of sustainability, and later chief impact officer in 2021

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