Can Digital-MRV Boost Africa’s participation in the VCM?

Introduction

Monitoring, Reporting, and Verification (MRV) is a multi-phase process deployed to quantify the amount of greenhouse gas (GHG) emissions reduced by a specific mitigation activity, such as the use of renewable energy sources, over a period of time. The findings are then reported to an accredited third party, usually a carbon registry, which then verifies the report, and carbon credits are issued upon certification. The goal of MRV is to ensure that emissions reductions or avoidance claims made by project developers are accurate, credible, and verifiable.

The monitoring, reporting, and verification (MRV) of the impact of climate change mitigation activities is a crucial aspect of the project cycle in all carbon standards. However, conventional approaches towards MRV and issuance of emission reduction certificates have been prohibitive for most carbon project developers, especially in developing countries. The costs related to conventional MRV, coupled with low carbon prices and long lead-time have adversely affected the financial feasibility of emission reduction projects on the continent.

Despite the widespread digitalization of various sectors, such as finance, manufacturing, retail, and social media over the past few decades, the MRV process in the carbon market continues to be largely based on manual reporting and verification methods, often relying on reports, checklists, and spreadsheets sent via email. This conventional approach can be time-consuming and error-prone, requiring comprehensive on-site visits for project implementation and meter readings.

So, what is DMRV?

Digital Monitoring, Reporting and Verification or DMRV in short refers to the use of digital technologies to enhance the monitoring, reporting and verification of various environmental and sustainability initiatives. DMRV solutions use a range of digital tools such as remote sensing, machine learning, blockchain technology, mobile applications, and smart sensors to collect, process, analyze, and synthesize data.

In recent years, the rapid expansion of the climate tech sector has led to the availability of a wide range of digital tools, such as enterprise-level greenhouse gas accounting software and remote sensing monitoring platforms. These platforms have the potential to streamline carbon market projects and improve the credibility of MRV results by automating the data capturing and processing process.

Advantages of Digital MRV over Conventional MRV

• Reduced Costs and Transaction Time

 

Traditional MRV requires comprehensive on-site visits for project implementation and meter readings, which can be time-consuming and expensive. Digital MRV eliminates the need for on-site inspections, as it allows for remote monitoring and reporting. This reduces the costs associated with MRV, freeing up resources that can be redirected towards other critical aspects of the project.

• Improved accuracy and transparency 

 

By automating the data capturing and processing process, digital MRV reduces the risk of human error that is common in manual reporting and verification methods. This, in turn, leads to more accurate and reliable results, improving the credibility of carbon credits. Digital MRV also allows for real-time monitoring and reporting, providing greater transparency in the MRV process and allowing for quicker resolution of any issues that may arise.

• Reduced Risk of Data Loss and Tampering

 

Traditional MRV methods often rely on manual data handling, which increases the risk of data loss and tampering. With digital MRV, data can be securely stored and easily accessed, reducing the risk of data loss and ensuring the integrity of data. The implementation of technologies such as blockchain/Distributed Ledger Technology ensures that collected data is immutable, making it less likely for the data to be altered or tampered with. 

• Scalability

 

Traditional MRV can become complex and time-consuming as projects grow in size and scale. Digital MRV, on the other hand, is designed to handle large amounts of data and can easily expand to accommodate new projects, making it a more efficient and cost-effective solution for carbon projects of all sizes. This scalability also allows for more streamlined and automated processes, reducing the risk of errors and increasing the accuracy and reliability of MRV results.

DMRV and Credibility

The slow progress in the digitalization of MRV and the carbon market project cycle over the past 15 years could be attributed to the dismal market activity and the reluctance of carbon standards to adopt digital approaches in the past. However, this has been changing in recent years. We are already seeing a massive push from carbon registries, project developers, multilateral institutions and other stakeholders to incorporate and adopt Digital MRV systems and approaches.

Verra, the leading carbon registry, launched a DMRV working group to help identify new approaches to use digital platforms to automate data collection and processing for the development, validation, and verification of VCS projects. In addition to launching a working group, in December 2022 Verra requested for expression of interest from stakeholders wishing to participate in its digital MRV pilot program to support the digitalization of VCS-approved methodologies, project templates, and ERR calculations. Verra has also recently completed public consultations with web3/Blockchain players in the carbon market to establish best practices for the tokenization of carbon credits.

Another registry, Gold standard, has launched three working groups tackling the digital transformation of the Carbon Market, in collaboration with ClimateCHECK and IOTA Foundation. The three working groups are centered around Digital Monitoring, Reporting and Verification (MRV)’, ‘Digital Assets for Climate Impact’, and ‘Digital Infrastructure and Open APIs’

The World Bank has not been left behind in this push for the digitization of MRV. The World Bank Climate Warehouse was set up for the sole purpose of prototyping, testing, and developing end-to-end digital infrastructure for carbon markets. Some of the initiatives being pursued under the climate warehouse include digital MRV systems, a metadata layer (the Climate Action Data Trust), open-source national carbon registries, the ability to issue and track digital carbon assets (native and permissioned tokens), and a one-stop resource platform that enhances knowledge sharing and capability building.

Multiple pilot projects have successfully implemented DMRV systems. Pachama, a leading climate-tech company is piloting a DMRV platform harnessing remote-sensing to measure forest carbon in collaboration with Verra. Technology partners, a fairly new addition to the carbon market ecosystem, have largely been at the forefront in developing and piloting DMRV systems. They include SustainCert, the HBAR Foundation, and Boomitra among others. It is clear that the space is ripe for disruption, with new players expected to trickle in over the next decade.

Conclusion

To fully leverage the cost and time-saving potential of digital technologies, current carbon standards need to be transitioned to incorporate the use of DMRV systems. By utilizing advanced digital MRV, the need for on-site inspections can be reduced or eliminated and the manual checks of data integrity, completeness, and accuracy can be minimized. This can lead to near real-time issuance of certified credits and the associated payments for their delivery.

Carbon projects in Africa have been adversely affected by the lack of validation and verification capacity on the continent. DMRV would go a long way in reducing project development costs and ultimately boosting Africa’s participation in carbon markets. This is why Verst Carbon, under the Africa Carbon Markets Initiative, has been at the forefront of advocating for the digitization of the MRV process. We believe that for the Voluntary Carbon Markets to meet its growth projections, it is vital that highly scalable technologies be adopted to address the growing market.