Should you get into carbon credits as a WASH business…Part 2
We come back to this topic (read our previous article), with an insightful study published by the Container-Based Sanitation Alliance (CBSA) and South Pole, in collaboration with our member Toilets for All. Five container-based sanitation (CBS) operators were assessed in detail on their potential to generate revenue from carbon credits. The study finds an earning potential of US$2.4 million over 5 years, but profitability is limited by the exorbitant cost of certification. We asked the authors a few questions.
Isabella Montgomery, you co-authored the study, just quickly remind us first, what the link between sanitation and carbon credits is…
We’re learning more and more about the impact of poorly managed sanitation on the climate crisis and it’s pretty huge. Sanitation is estimated to contribute 2-6%1 of global methane and 1-3%2 of global nitrous oxide emissions. In some places, it’s much higher. In Kampala in Uganda for example – a recent study there showed that almost half of the city’s emissions are linked to sanitation. That’s pretty staggering, even the researchers were surprised by those findings.
The CBSA started looking into emissions from container based sanitation (CBS) in 2018 when it produced a calculator which found that CBS systems significantly reduced emissions3. CBSA and its members are always on the lookout for creative ways to reduce the funding gap between the cost of service provision and revenues. We’d love to see mechanisms like the Green Climate Fund (GCF) support and incentivise climate-smart sanitation but we’re not there yet as a sector, so CBSA decided to look at carbon credits.
What is the climate impact of the sanitation businesses in your study?
When faecal sludge or wastewater undergoes anaerobic digestion, it produces methane, nitrous oxide, and carbon dioxide. These emissions are most significant during containment and treatment. As CBS services quickly collect and treat waste, they significantly limit anaerobic degradation and related emissions. Our carbon credit feasibility study confirmed our earlier calculations, that CBS projects would significantly reduce baseline emissions, by 79% to 93%, depending on what treatment is used and the context.
And how much money can a business really make by joining a carbon credit scheme?
Modelling the projected scale-up of five of our members, we found that they could collectively earn US$2.4 million in eligible carbon credit revenue over five years for approximately 81,000 toilets and co-treated solid waste. Scale is important. Accessing carbon credits is costly and complex and really only starts to become viable for CBS when operating at least a small neighbourhood of 5-10,000 households. That said, these numbers are quite interesting for enterprises that are scaling up and potentially utilities.
But there are significant barriers, as well, right?
Indeed, the cost of certification is pretty steep, which is why scale is so important. An interesting finding was how much collecting and treating additional organic waste, such as food or animal waste, further reduced emissions for our members. This helped to significantly improve the viability of a carbon credit project.
Do businesses need an enabling ecosystem to take advantage of carbon credit opportunities?
There are a number of barriers within the carbon credit world itself that, if addressed, could really help to make carbon credits more feasible for sanitation enterprises – particularly around the registration costs and some of the standard rules. Within the wider ecosystem, research is key. More empirical research and modelling work on emissions from non-sewered sanitation will be key to getting IPCC figures updated to ensure more accurate calculations. We also need to understand better the extent to which scheduled or frequent emptying reduces emissions.
We see this work as one step in a broader shift to incentivising climate-smart sanitation and we definitely need to see further changes in the enabling environment to facilitate that. Governments need to align their sanitation policies with climate commitments and sanitation needs to be fully integrated into the climate policy and mechanisms. We are making some progress on this front through the Climate Resilient Sanitation Coalition (CRSC).
What would then be your take-away message from the study?
Pursuing carbon credits revenue is risky, but from what we are seeing for CBS, it can be worth it, provided a business can scale-up sufficiently. We are also optimistic that preparing businesses for carbon credit investments could bring added benefits in the long term as a meaningful step towards accessing other types of climate funding. Ultimately, it would be great if carbon credits could incentivise climate-smart sanitation both through increased offsetting as well as unlocking other climate funds to ensure much-needed action to address the climate emergency.
1 https://essd.copernicus.org/articles/8/697/2016/
2 https://www.tandfonline.com/doi/abs/10.3763/ghgmm.2010.0007
3 See Policy brief: Supporting the shift to climate positive sanitation, UNC Poster Presentation: Calculating the climate change mitigation potential of container-based sanitation systems, CBSA GHG emissions calculator.