Last updated:
May 24, 2024

Buffer Pool

What is a Buffer Pool?

Buffer pools act to provide projects with a safety net, acting in a similar manner to an insurance policy, by holding onto a specified amount of carbon credits to not be sold. The primary role of buffer pools is to offset any unforeseen losses or damage to the project’s carbon stocks, such as those caused by natural disasters or unexpected environmental changes. By doing so, buffer pools ensure the integrity and reliability of carbon credits, ensuring that each credit represents a genuine reduction in carbon emissions.

Buffer pool for carbon credit projects

How Does the Buffer Work?

Fundamentally, the operational mechanism of buffer pools is triggered if a loss occurs that affects the project's carbon stock. However, not every loss leads to credits being withdrawn from the pool. It largely depends on the net emissions reductions achieved by the project. If the project experiences a net loss of carbon stock, as verified, measures such as the cancellation of an equivalent number of credits from the buffer pool are taken. This is to ensure that the overall environmental impact of the project remains positive.

What Happens to Credits in a Buffer Pool if Nothing Goes Wrong?

If a carbon credit project proceeds successfully without any significant loss of carbon stock, the credits held in the buffer simply pool remain unused. Over time, if the project continues to perform well and demonstrates reduced risks, a portion of these buffer credits can sometimes be released and sold. This incentivises project developers to maintain high standards of operation and risk management.

Determining Buffer Pool Contributions

Determining the size of contributions to buffer pools is a nuanced process, influenced by a range of risk factors that differ from project to project. These factors can include environmental threats (like the likelihood of fires or floods), the project's management efficiency, and its financial stability. The contribution size needs to strike a balance between keeping sufficient reserves for comprehensive risk coverage while also maintaining the economic viability of the project.

Implications for Sustainability Leaders

Sustainability leaders looking to purchase carbon credits need to understand how buffer pools work. When evaluating carbon credit projects, it is important to assess both the size of their buffer pools, along with how they are managed. These factors are indicative of the project's long-term resilience to environmental risks as well as the reliability of the emission reduction or removal claims. This is why assessing project buffer pools is a significant step in Senken’s due diligence process, ensuring a selection of projects that align with long-term sustainability goals and genuine contribution to climate change mitigation.

Senken's due diligence process for determining the quality of carbon credit projects

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