dClimate, a climate startup supported by investors like Mark Cuban, has struck a preliminary deal to generate $1 billion in carbon credits by preventing deforestation in the Democratic Republic of Congo.
This initiative focuses on preserving approximately 500,000 hectares (1.24 million acres) of peatlands in the world’s second-largest tropical forest. The agreement involves dClimate paying the Congolese government for the rights to sequester 100 million tons of carbon dioxide over a decade.
The startup will monitor the land to ensure deforestation is being halted and will aid Congo in developing a carbon-credit registry. These credits will then be sold on the open market. dClimate’s co-founder, Siddhartha Jha, mentioned that the value of these credits could reach around $1 billion during the contract period.
Congo’s forests and peatlands are seen as a significant, yet largely untapped, source of carbon credits. These areas are particularly effective in storing carbon, as the waterlogged conditions in peatlands inhibit the full decomposition of organic matter, preventing the release of carbon back into the atmosphere. However, for these credits to be considered valuable both environmentally and in the market, dClimate must demonstrate that their payments are leading to additional peatland protection that wouldn’t have occurred otherwise.
Neighboring countries like Gabon have faced challenges in selling carbon credits due to the principle of additionality – proving that the land being protected was genuinely at risk. Despite this, Congo’s vast forests capture an estimated 822 million tons of greenhouse gases annually, suggesting the potential for billions of dollars in credit value if additionality can be substantiated.
However, the integrity of such offsetting claims has been questioned by climate activists and researchers. A study in Science revealed that only 6% of offset projects were linked to additional carbon reductions through preserved forests. This skepticism has led to Congo’s credits trading at about $5 on the voluntary market, significantly lower than credits in more regulated markets like the US and EU.
Jha believes that dClimate’s technology and the new registry will enable them to sell credits at a higher price of $7 to $10, providing assurance of legitimate offsets to investors. dClimate plans to retain 10% to 20% of credit payments as a fee. The deal, in negotiation for two years, aligns with Congo’s goals of balancing ecological preservation with national growth, as stated by Stephanie Mbombo, Congo’s special envoy for the new climate economy. The project is expected to commence in 2024 after finalizing the contract.