Two of DGB’s carbon projects enter development phase (8.8 million carbon credits)

Dutch Green Business Group N.V. (“DGB”, “DutchGreen” or “the Group”) (Euronext: DGB), a leader in carbon offsetting and ecosystem restoration company, is excited to announce an update on its two large-scale carbon projects in Kenya which are expected to originate over 8.8 million carbon credits over their project lifetime.

Highlights:

  • The DGB Hongera Afforestation Project, for which DGB has the right to receive 100% of the carbon credits originated and has exclusive carbon and marketing rights, is expected to create over 7 million credits over its 30-year project lifetime (approximately 225,000 carbon credits per annum).
  • The Hongera Energy Efficient Cookstove Project, for which DGB has the right to receive 100% of the carbon credits originated and has exclusive carbon and marketing rights, is expected to create over 1.8 million credits over its 6-year project lifetime (approximately 300,000 carbon credits per annum).
  • The current index price for Nature Based Carbon Offset Credit in the voluntary carbon markets is $9,81. On March 2nd, 2022 DGB completed its first large offtake agreement for 126,297 carbon credits with a contract price of US$10 per tonne with a  multinational energy company which contributed €1.1 million revenue to Q1 2022. 
  • The expected total development costs by DGB over the next 3 years are EUR 7.4 million for both projects.
  • DGB plans to finance its project pipeline through:
    • entering into long-term offtake agreements for future credits. A long-term offtake agreement is a legal contract in which a buyer agrees to purchase a set amount of carbon credits at set price points at a set time into the future; 
    • reinvesting most of the the carbon credit revenues from running projects into new project developments; and
    • offering project-specific investment opportunities to investors, such as its green impact bonds.

Project status

On November 1, 2021 DGB announced both Kenia carbon projects have passed the feasibility studies. After the pre-roll out, operations have now commenced and DGB´s carbon team is in Kenya to start the nurturing of seedlings and the project certification process.

flowcharts-01 (1)

DGB and local project implementer AIAT have partnered on two carbon offset projects to originate high-integrity carbon credits known as Verified Emission Reduction (“VERs”). VERs are also commonly known as voluntary emission reductions, carbon offsets or carbon credits. VERs are essentially a reduction in greenhouse gas emissions (“GHG”) from a project that is independently audited (i.e., verified) against a third-party certification standard. Each VER represents one metric tonne of carbon dioxide equivalent emissions.

DGB develops the large-scale afforestation and reforestation carbon project (“AR project”) under the leading carbon standard, known as the Verified Carbon Standard (“VCS”) and the Climate, Community and Biodiversity Standard (“CCBS”). 

The current status of the AR project is that the seeds and seedlings are being planted in the nurseries now, to prepare for transfer to the final destination in the post-summer rain season.

The manufacturing and distribution of cookstoves will be designed as a standalone carbon offsetting project under the Gold Standard methodology ‘’Technologies and Practices to Displace Decentralized Thermal Energy Consumption’’ (“Cookstoves project”). 

The current status of the Cookstoves project is that the raw materials are being sourced (metal, concrete, etc) for production in existing cookstove manufacturing facilities, and distribution areas are being identified and prepared through stakeholder consultation (community awareness and information) sessions.

The teams working on both projects have a strong track record in implementing large-scale carbon projects. DGB and AIAT have a wealth of experience and the team consists of skilled carbon market traders and VCS-CCBS carbon experts, as well as local agro engineers, project managers, and other forestry professionals. 

Project financing

DGB is focused on scaling its operations and financing the projects by entering into long-term offtake agreements for carbon credits to be verified in 2022 and onwards. This is an important part of its carbon credit sales and distribution strategy.

A long-term offtake agreement is a legal contract in which a buyer agrees to purchase a set amount of carbon credits at set price points at a set time, usually several years into the future. Long-term offtake agreements provide DGB with predictability as to how many carbon credits intend to be sold and the revenue generated by a project in the future. This helps seed confidence in forest carbon projects, de-risking capital investments of the Group.

flowcharts-02 (1)

Long-term offtake agreements are beneficial to carbon offset buyers. They provide access to high-quality, verifiable carbon credits at a typically discounted price, in an environment where cost is rising as demand outstrips supply. They assist in long-term planning and strategy formulation for companies, providing a definite picture of costs associated with their net zero targets. 

Long-term offtake agreements fuel scalability and create a space for real, innovative partnerships between companies and project developers that would never exist otherwise in year-by-year transactions on the spot market.

Sales and distribution network

In Q3 2021 DGB has entered into its first binding carbon credit offtake agreements pursuant to which DGB committed to offset carbon emissions for various customers. On March 2nd, 2022 DGB announced the completion of its first large offtake agreement for VERs (€1.1 million revenue).

To boost the amount of offtake agreements and finance its project pipeline, DGB is actively expanding its sales and distribution network by partnering with key-players in the sector,  On May 18th, 2021 the Company announced a strategic stake in retail platform Corekees. Recently the Group announced a partnership with Emstream and their proprietary wholesale voluntary carbon marketplace, Emsurge Carbon and entered into a collaboration with StenVi to add value to DGB”s existing carbon credit distribution network, as well as selling directly to consumers by expanding its impact consultancy team.

 

Links:

 

Contact details:

DGB GROUP NV
press@dgb.earth
+31 (0) 20 8080825 (NL)
+44 (0) 20 8064 0936 (EN)

 

About DGB:

Dutch Green Business Group N.V. is a public company traded on the main Dutch stock exchange Euronext Amsterdam under the ticker symbol AEX:DGB and ISIN-code NL0009169515. DGB’s strategy is to participate in large forest carbon offset projects around the world that deliver commercial and environmental benefits. DGB’s vision is to be a leading high-impact investor in sustainably managed forests by providing competitive real investment returns for shareholders combined with high social impact. www.dgb.earth

 

About DGB’s carbon projects in Kenya:

The projects will engage over 20,000 farmers and create employment opportunities for thousands of people in local communities. Much of the planting will be of fruit tree species which has both  1) direct economic benefit to local farmers who will be able to sell produce, and 2) provides long term incentives for the project participants to maintain the quality and health of the forest.

The projects will also see the manufacture and distribution of 150,000 energy-efficient cookstoves in communities where the tree planting takes place. The cookstoves will reduce by more than half the use of charcoal and wood as the primary energy source for cooking in these local communities. The manufacturing and distribution of cookstoves will be designed as a standalone carbon offsetting project under the Gold Standard methodology ‘’Technologies and Practices to Displace Decentralized Thermal Energy Consumption’’.

A portion of the revenue generated from the sale of carbon credits will go directly to the project to support local community development and provincial government infrastructure. In addition, expenditure spent on project area protection and conservation can potentially lead to higher GHG emission reductions within the running projects through a decrease in needed credit buffers, and thereby increased carbon credits in future years. These activities can include building watch towers to monitor wildfires or deforestation activities, cleaning rivers and planting mangroves for reforestation.  This helps seed confidence in forest carbon projects, de-risking capital investments of the Group.

Community involvement is vital for these activities, which encourages and incentivises local people to take an active part in continual project development. Community involvement is also enhanced through the development of programs to improve quality of life, such as water filtration systems, floating healthcare facilities, educational scholarships, and solar energy. All of which make significant contributions to Kenya´s sustainable development goals and UN climate commitments.

The project will have several locations that span central Kenya. However, most of the trees will be planted in government protected forests that were previously deforested during the 1980s and 1990s. In each case, the project will extend to the communities living below the forested areas, where fruit and nut trees will be planted along with a small percentage interspersed with crops such as tea and coffee. This investment in a sustainable forest management process will also help conserve water in one of Kenya’s key catchment areas.

In Nyeri county, two blocks covering a total area of 3,472 hectares will be replanted with indigenous trees. Members of local villages will plant, care for and conduct monitoring activities relating to the planted trees. They will also coordinate planting of trees in households, obtaining legal agreements to ensure conservation of the trees throughout the project period. Trees planted in the homesteads will consist of fruit and nut trees, such as avocado and macadamia, alongside selected tree species that intercrop well with tea, coffee and horticultural activities.

In Kirinyaga county, the project covers an area inside the Mount Kenya Forest Reserve. A recent assessment (Nature Kenya, 2019) estimated Mt Kenya’s forest cover at 80,962 hectares, which has declined 21% in less than 10 years. As with the project in Nyeri county, this area will primarily consist of replanting the deforested areas with indigenous trees.

In Murang’a and Nyandarua counties, which span the Aberdare Range (a 160 km long mountain range of upland, north of Kenya's capital Nairobi with an average elevation of 3,500 metres) the project will oversee the planting of indigenous tree species including Podo and Meru Oak. Logging and deforestation activities have left large areas of the forest depleted in this area. Below the forest, the project will extend the planting into communities living there to involve them in meaningful economic empowerment, use of energy efficient wood cookstoves and planting of woodlots that will generate carbon credits.

 

Frequently Asked Questions (FAQ)

What are nature-based solutions?

The world needs a range of measures to limit carbon dioxide (CO2) emissions while meeting rising energy demand. They include the protection and restoration of natural ecosystems such as forests, grasslands and wetlands. Nature-based solutions are the management and use of land for tackling social and environmental challenges. Nature conservation, afforestation, reforestation, agroforestry and urban greening are all land based projects which qualify as nature-based solutions. 

 

What is a carbon offset?

Verified Emission Reduction (“VERs”) are also commonly known as voluntary emission reductions, carbon offsets or carbon credits. VERs are essentially a reduction in greenhouse gas emissions (“GHG”) from a project that is independently audited (i.e., verified) against a third-party certification standard. Each VER represents one metric tonne of carbon dioxide equivalent emissions.

Individuals and corporations around the world are recognizing the importance of reducing their GHG emissions. As a result, many of them are reducing their carbon footprints through energy efficiency and other measures. Quite often, however, it is not possible for these entities to meet their targets or eliminate their carbon footprint, at least in the near term, with internal reductions alone. They need a flexible mechanism to achieve these aspirational goals and enter the carbon markets. 

By using the carbon markets, entities can neutralize, or offset, their emissions by retiring carbon credits generated by projects that are reducing GHG emissions elsewhere. Of course, it is critical to ensure, or verify, that the emission reductions generated by these projects are actually occurring. 

Companies and private individuals are interested in contributing to their living environment. In order to translate this willingness into implementation, nature offsets and especially carbon offsets make nature compensation easy and provide an appropriate, flexible system of compensation. 

Although there is an interest in contributing to nature conservation from the point of view of corporate social responsibility (CSR), this interest has seen a rise in the last year due to the need to reduce and offset carbon emissions. Carbon offsetting happens on a mandatory basis, as well as on a voluntary basis for Corporate Social Responsibility (CSR) and public relations.

 

What is a biodiversity offset?

A biodiversity offset is an innovative approach to quantify in a transparent way the net positive impacts of an investment on 1 hectare preserved, restored, or managed through sustainable land practices. It will allow business to invest in projects that add value to the company and create tangible benefits for a region of land and its communities.

Compensating damage to nature or biodiversity is a way by which the harmful impact that an activity or intervention has upon it, can be mitigated. 

Biodiversity offsetting happens on a mandatory basis, as well as on a voluntary basis for Corporate Social Responsibility (CSR) and public relations.

 

What does it mean ‘to retire an offset’?

By “retiring” a carbon offset or biodiversity offset on behalf of its clients, DGB removes the offsets from the market, rendering them unusable by the heavy-polluting companies. To “retire” a carbon offset, DGB officially registers the offset as “used”. Until a carbon offset is retired, it is available for trading and cannot be used to offset emissions of the current holder.

 

How does DutchGreen verify its offsets?

DutchGreen verifies its carbon offsets according to the VCS Program Rules. The VCS Program is the world’s most widely used voluntary GHG program. Nearly 1,700 certified VCS projects have collectively reduced or removed more than 630 million tonnes of carbon and other GHG emissions from the atmosphere. 

Projects developed under the VCS Program must follow a rigorous assessment process in order to be certified. VCS projects cover a diverse range of sectors, including renewable energy (such as wind and hydroelectric projects), forestry (including the avoidance of deforestation), and others. 

The VCS Standard lays out the rules and requirements which all projects must follow in order to be certified. All VCS projects are subject to desk and field audits by both qualified independent third parties and Verra staff to ensure that standards are met and methodologies are properly applied.

Projects are assessed using a technically sound GHG emission reduction quantification methodology specific to that project type.

 

How does DutchGreen make sure that a project has an actual impact?

DGB checks all its projects for additionality, permanence and non-leakage. 

  • Additionality: Additionality requires the forest project to sequester more carbon than in a ‘business as usual’ scenario. Project must demonstrate that the carbon sequestration would not have happened without the development of the specific offset project.
  • Permanence: Permanence requires that GHG removal enhancements must be maintained for up to 100 years. To demonstrate permanence each project must undergo a third-party verification of inventory reports and a site visit every six years during the life of the project (~25 years).
  • Non-leakage: Leakage from carbon projects happens when GHG reductions in one area results in an unintended increase in GHG emissions in another location. Project managers must demonstrate that their project does not cause excessive leakage, essentially wiping out the increases in GHG removal from their project. 

 

Does DGB own all the land of its projects?

There are three ways in which DGB intends to gain rights to use the land for projects.:

  • Buy the land
  • Lease the land
  • Work together with third-party landowners 

In order to make a nature-based project into a success, there is always an investment from DGB into the land. The quality of the land improves from DGB’s investment. 

This does not mean that DGB is always the owner of the land. The acquisition of land is only considered if there is no other possibility to conserve nature or prevent deforestation, as it requires a large(r) upfront investment to commence a project. 

DGB has sourced 250.000 hectares of land acquisition projects in Paraguay that are in immediate danger of deforestation. DGB is exploring options to finance the acquisition. At the moment, DGB does not own any land. DGB works together with existing landowners for every project in its project pipeline.

 

What are emissions trading schemes?

Emissions trading schemes, also known as emissions allowances, are regulated markets where businesses transact certificates that allow the owner of that certificate to pollute (an externality of their business activity). 

The EU Emissions Trading Scheme (ETS) is the most advanced in the world. The EU sets a limited (and annually decreasing) number of "pollution allowances" to be issued to businesses (some of which are given for free, whilst others are sold), which effectively limits (and gradually enforces a decrease in) the total emissions within the European block.

In 2021, China launched its country-wide emissions cap-and-trade system, after being postponed since 2015, and it quickly became the world’s largest. That said, it's still quite nascent, especially when it comes to its secondary trading. California runs a similar cap-and-trade system and it's one of the most developed schemes alongside Europe’s.

 

What is CORSIA?

The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) was developed by the International Civil Aviation Organization (ICAO) and was adopted in October 2016. Its goal is to have carbon-neutral aviation growth from 2020. 

The scheme is voluntary and is supposed to work until 2035 at least. The total demand for those 15 years is estimated at 2,700 million tons of CO2 equivalent in offsets 

 

What is a cap-and-trade system?

Most carbon credits are part of cap-and-trade systems, which involve a cap on the amount of carbon dioxide companies can emit and a market system through which companies can buy, sell and trade their credits. 

Companies involved in these systems receive carbon credits, so they can participate in economies that monitor and regulate carbon emissions. Usually, the government sets the emissions caps for each industry and determines the penalties for exceeding the maximum emissions levels. 

Companies receive carbon credits, which allow them to emit carbon dioxide, as their allowance toward the cap, or they can sometimes purchase carbon credits at auction. The cap is the number of carbon dioxide emissions the industry is not to exceed, and the allowance is each company's share of permitted emissions.

 

What is a voluntary carbon market?

The voluntary markets are the overall name for all voluntary verified carbon emission reduction offsets. The main objective for acquiring Verified Emission Reduction (VER) credits, is to neutralize the carbon footprint, motivated mainly by Corporate Social Responsibility (CSR) and public relations.

The voluntary carbon market enables private investors, governments, non-governmental organizations, and businesses to voluntarily purchase carbon offsets to offset their emissions. Companies that are unable to reduce their emissions can purchase carbon offsets from verified suppliers to offset their emissions.

 

How big are the regulated ETS in comparison to the voluntary carbon market?

Regulated trading schemes cover a larger amount of carbon emissions with fewer parties involved when compared to the voluntary carbon markets.  Last year the value of global carbon markets hit a record of EUR 229 billion, a five-fold increase from 2017 and the fourth consecutive year of record growth. 

In 2020, the EU ETS issued over 1,300 allowances of 1mt of CO2 each (for a total of 1.3 billion tonnes). The newly created Chinese ETS was worth 4 billion tonnes. In the same year, the voluntary carbon market issued over 220 million high-quality carbon credits of 1t of CO2 each.  In 2020 around EUR 1 billion-worth of carbon offsets changed hands a day.

ETSs cover larger polluters and therefore cover a more representative volume of emissions (i.e. 1.3-1.5 billion tonnes in the ETS space vs. 0.22 billion tonnes in the voluntary market), and the voluntary markets involve more parties (you and me as a consumer, a small business owner, a large retail company, etc.) and therefore a greater number of emissions certificates. 

 

What do analysts say about the future size of the voluntary carbon markets?

As efforts to decarbonize the global economy increase, demand for voluntary carbon credits could continue to rise. Based on stated demand for carbon credits, demand projections from experts surveyed by the TSVCM, and the volume of negative emissions needed to reduce emissions in line with the 1.5-degree warming goal, McKinsey estimates that annual global demand for carbon credits could reach up to 1.5 to 2.0 gigatons of carbon dioxide (GtCO2) by 2030 and up to 7 to 13 GtCO2 by 2050.

Depending on different price scenarios and their underlying drivers, the market size in 2030 could be between $5 billion and $30 billion at the low end and more than $50 billion at the high end. while the voluntary carbon market's primary market is expected to be worth up to €100 billion by 2030.

The Taskforce on Scaling Voluntary Carbon Markets (TSVCM), sponsored by the Institute of International Finance (IIF), estimates that demand for carbon credits could increase by a factor of 15 or more by 2030 and by a factor of up to 100 by 2050. 

 

What is the price for a carbon offset on the voluntary carbon market?

The price of 1 ton of carbon differs per offset and changes depending on the underlying projects. The main factors to establish the price of a carbon offset are:

  • Type (Afforestation/Reforestation, Avoided Conversation or Improved Forest Management)
  • Vintage (year of offsetting)
  • Additionality (Additionality requires the forest project to sequester more carbon than in a ‘business as usual’ scenario. Project must demonstrate that the carbon sequestration would not have happened without the development of the specific offset project.)
  • Location
  • Community aspects 
  • Biodiversity aspects

The biggest difference is between avoidance type offsets and removal type offsets. Both of these offsets are extremely important for nature conservation – avoidance offsets ensure the existence of more emission-efficient businesses, while removal offsets increase the Earth’s sequestration capabilities beyond our natural wild forests and gardens.

Pricing on carbon credits depends on the factors above, but the main index for Nature Based Carbon Offsets has daily traded price: https://carboncredits.com/carbon-prices-today

 

What companies are offsetting their carbon emissions through the voluntary carbon markets?

DutchGreen is making a call to businesses and organizations worldwide to take collective action on nature, biodiversity and ecosystem restoration. The Group urges everyone to work together to build a safe and healthy planet for the next generations. 

DGB envisions a connected world where collaboration among leading businesses and organizations can help conserve our precious planet and wildlife. 

Below we have outlined great case studies of companies that are offsetting their carbon emissions through the voluntary carbon markets:

 

What is likely to drive demand for voluntary carbon credits?

Demand for lower-quality credits will decrease as more scrutiny comes into this space and people become better informed. This is an important positive development and will mean that voluntary carbon credit pricing is likely to increase as demand will focus on high-quality offsets. That will especially be the case for high-quality vetted projects in developed countries.

 

What is the Taskforce on Scaling Voluntary Carbon Markets?

The Taskforce on Scaling Voluntary Carbon Markets is a private sector led initiative working to scale an effective and efficient voluntary carbon market to help meet the goals of the Paris Agreement.

The Taskforce was initiated by Mark Carney, UN Special Envoy for Climate Action and Finance; is chaired by Bill Winters, Group Chief Executive, Standard Chartered; and is sponsored by the Institute of International Finance (IIF) under the leadership of IIF President and CEO, Tim Adams. Annette Nazareth, senior counsel at Davis Polk and former Commissioner of the US Securities and Exchange Commission, serves as the Operating Lead for the Taskforce. McKinsey & Company provides knowledge and advisory support.

The TSVCM’s over 250 member institutions, represent buyers and sellers of carbon credits, standard setters, the financial sector, market infrastructure providers, civil society, international organizations and academics. An advisory board of 20 environmental NGOs, investor alliances, academics and international organizations provide guidance on TSVCM recommendations.

The Task Force's unique value proposition has been to bring all parts of the value chain to work intensively together and to provide recommended actions for the most pressing pain points facing voluntary carbon markets.

 

How can verification and transparency of offsets drive market demand?

Carbon offsetting on a voluntary basis could be a game changer, providing funding to projects that avoid and remove carbon from the atmosphere. Yet there is scope to improve transparency of various carbon crediting mechanisms and a need for standardization of crediting and accounting. This would enhance customer trust in the offsets offered, result in higher market volumes and a real, functioning market. Large customers but also national and supranational governments should demand more standardization and regulation of this market to make this a reality in the near-term.




Disclaimer:

This press release does not contain (an invitation to make an) offer to buy or sell or otherwise acquire or subscribe to shares in DGB Group N.V. and is not an advice or recommendation to take or refrain from taking any action. This press release contains statements that could be construed as forward-looking statements, including with regard to the financial position of the DGB Group, the results it achieved and the business (ies) it runs. Forward-looking statements are all statements that do not relate to historical fact. These statements are based on information currently available and on forecasts and estimates made by DGB Group management. Although the DGB Group believes that these statements are based on reasonable assumptions, it cannot guarantee that the ultimate results will not differ materially from those statements that could be construed as forward-looking statements. Factors that may lead to, or contribute to, differences in current expectations include, but are not limited to: developments in legislation, technology, tax, regulation, stock market price fluctuations, legal proceedings, regulatory investigations, competitive relationships and general economic conditions . These and other factors, risks and uncertainties that may affect any forward-looking statement or the actual results of DGB Group are discussed in the annual report. The forward-looking statements in this document speak only as of the date of this document. Subject to any legal obligation to do so, the DGB Group assumes no obligation or responsibility to update the forward-looking statements contained in this document, whether related to new information, future events or otherwise.

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