Carbon offsets should have the same value as PPAs for project finance


Written by Alexis Leroy, CEO ALLCOT


Carbon offsets are just as valid and valuable as renewable power

Anyone involved in developing clean energy projects around the world will be familiar with the demands of securing project finance. Lenders typically want to see a solid revenue stream before they consider financing renewable energy or low-carbon energy projects.

Normally, a Power Purchase Agreement (PPA) fits this requirement: a long-term offtake agreement with a high-quality buyer offers confidence that the project will generate steady cash flow to service its debt.

Occasionally a PPA by itself may not be regarded as a sufficient guarantee of performance, or the off taker’s credit quality may not be sufficiently strong. In such instances additional security can be added in the form of liquid guarantees or performance bonds.

But there is another revenue stream that can play its part: carbon offsets.

Carbon offsets represent the saving in emissions of carbon dioxide and other greenhouse gases (GHGs); they’re measured against a baseline in which the project would use legacy technologies. In this way a wind farm, a solar park or a waste-to-energy plant represents savings in GHG emissions compared to coal or even gas-fired power.

The world is waiting for a new global offsets market to replace the Clean Development Mechanism (CDM) that will end when the Kyoto Protocol is superseded by the Paris Agreement in 2021. But in the meantime, there are plenty of opportunities to develop and sell carbon offsets for some existing markets. The revenues generated should help secure project finance.

South Africa and Colombia are leading the way in creating high-confidence markets for carbon offsets, by allowing them to be used in part payment of their respective national carbon taxes and thereby granting them a monetized value – at least on paper.

Besides, the International Civil Aviation Organisation is preparing the launch a global offsetting market for airlines in January 2021. Demand for offsets from airlines participating in CORSIA is projected to reach as much as 174 million tonnes of CO2 equivalent (tCO2e) tonnes in 2025 and could be nearly 8 billion tCO2e by 2040.

And beyond these formally established, government-backed markets is a wide variety of voluntary carbon offsetting programs operated by large industrial, commercial and retail companies around the world. According to Forest Trends, nearly 49 million offsets were retired by governments, companies, and individuals in 2018.

There are plenty of challenges facing the use of carbon offsets as securities for project finance. Firstly, the revenue stream from offsets would likely form only a fraction of the overall project costs, and for some, it may simply not be worth the effort to incorporate offsets into a finance agreement.

Also, revenue streams from offset sales tend not to be regular, but “lumpy”. Offset projects must submit independent verification and reporting of the volume of emissions reduced before they can apply for the issuance of those credits, and the costs associated with that process usually mean they can only afford annual or even biennial issuance. Such periodic issuance may not be steady or regular enough to satisfy a lender.

Yet at the same time, using carbon revenue to secure financing may yield two significant benefits: the quality and the reliability of the purchaser. In the case of countries with carbon taxes that can be part-paid in offsets, the guarantor of demand is the government, and industrial emitters must abide by the law.

Similarly, in the case of CORSIA, the end-buyers will be international airlines seeking to comply with government-established, UN-approved targets.

Why is the end-use of the offset important? Because lenders are concerned not only with the scale of revenue streams from a project but also the reliability and creditworthiness of the buyers. Higher-quality off-takers will mean more security for the seller and hence for the lender.

Secondly, it’s important to understand that there is a direct link between the security of the supply of renewable electricity and the security of the supply of carbon offsets. It should be the case that any lender that relies on a PPA as security against project finance, should also be able to rely on the flow of offsets through an emissions reduction purchase agreement (ERPA).

Lenders will consider the reliability of the power project – how much power it is expected to deliver across the length of any contract – when estimating the value of the PPA. The PPA, therefore, is a measure of the potential supply of power, and it can, therefore, be a measure of the supply of carbon offsets.

In the case of many reliable renewable energy technologies – waste gas, solar and even wind power – the actual generation of power and the generation of offsets are very closely linked.

A project developer could even use future delivery of offsets as a source of seed capital for a project. This was a common practice under the UN Clean Development Mechanism. By arranging an ERPA with a buyer who is seeking offsets for some compliance or even voluntary purpose, a project developer can then use this ERPA to raise seed capital. To be sure, the volume of offsets may be subject to clipping, but the principle is sound.

So why don’t lenders take ERPAs into account? If we agree that the fight against climate change is paramount, then how can we not support carbon offsets as a valid source of capital, and indeed may be more valuable than megawatt-hours of renewable power generation?

Carbon footprint and Expotural, Feria de la Naturaleza y el Turismo Sostenible


Written by Patricia Piñero, Sustainability Consultant.


Between September 27th and 29th, the EXPOTURAL Nature and Sustainable Tourism Fair opened in Madrid in Hall 1 of IFEMA.

EXPOTURAL has become the national reference for sustainable tourism, where nature and biodiversity protection has the greatest role. It is a space to propose and facilitate the promotion and development of destinations through sustainable rural tourism.

A 6000 m2 venue hosted this celebration, accommodating numerous activities available to attendees. Among them the award for the best initiatives in sustainable tourism, being the winning company Bahía de Santander, and secondly, Casa del Tesoro. Bahía Santander received the award thanks to its ecotourism and environmental education project focused on the recovery of the osprey, through the installation of innkeepers and nests in height. A meeting point was also set up for professionals of Active Tourism business tables so that both exhibitors and attendees could participate in these business rounds.

In addition to all these activities, the II International Forum of Nature Tourism and Sustainable Tourism was held, a series of presentations and round tables developed within the pavilion, and structured in different blocks, which dealt with topics such as Ecotourism, Local Development and Sustainability, rural and active tourism, etc. All under a Responsible Tourism approach, above all, for the climate change mitigation.

Coinciding with the general strike called worldwide to support the fight against climate change, EXPOTURAL actively participated in this cause by dedicating the first day of the II International Forum of Nature Tourism and Sustainable Tourism to Climate Change, the latter being one of the structural axes of the fair’s philosophy.

Another edition in which we had the pleasure of being invited to participate in the forum and of being able to be an active part of EXPOTURAL, not only in the presentation we offered to attendees on the management of the carbon footprint for companies, but also contributing to offsetting the fair’s carbon footprint itself. 

Alfonso Polvorinos, technical director of the Fair and the Forum, contacted us some time ago to explore how we could assess the impact of the fair on climate change and mitigate it in the best possible way.

For the 2018 edition, we calculated the fair’s emission identified them and drew up a reduction strategy as recommendations adapted for it. After this study and conclusions, we offered the possibility of compensating for the emissions resulting from the activity of the fair, to obtain a neutral carbon balance. This was done and we have continued working to make it possible again in this edition.

This emission offsetting consists, in broad terms, of the economic investment in carbon credits, an international decontamination mechanism introduced by the Kyoto Protocol for the reduction of the emissions causing climate change.

Therefore, the fair compensated these emissions generated through its collaboration with the RMDLT project, a forestry project located in the Brazilian Amazon that works to protect this fragile ecosystem from the rampant deforestation of the jungle, while allowing degraded forests to have the opportunity to regenerate.

The project contributes to reaching 12 out of the 17 United Nations’ Sustainable Development Goals, among the most prominent we can mention: the improvement of the quality of life of the families that reside within the area and the land tenure of the people committed to the conservation.

For more information check our website www.allcot.com, or you can contact us directly at the following email ppr@allcot.com

Reflections on Climate Week New York and the role of explorers.


Written by Alexis Leroy, CEO ALLCOT


Last month, the climate change community met in New York City for Climate Week. Numerous organizations hosted events around the city on the sidelines of official United Nations events, making Climate Week one of the largest climate gatherings of the year.

I attended, among other events, the International Emissions Trading Association (IETA) “Carbon Forum North America”, held at the iconic Explorers Club headquarters in midtown.

The Explorers Club is an historic establishment that dates back to the early 20th century, when explorers such as Edmund Hillary, Theodore “Teddy” Roosevelt and Charles Lindbergh would regale members with tales of extreme conditions, new species of animals – some are still displayed in the club – and their efforts to push back the boundaries of human knowledge and achievement.

I like to think it was no accident that IETA chose The Explorers Club to host their annual event. Climate change is unknown territory: we are charting a new path into the realm of changing weather patterns and mankind’s ability both to prevent and to adapt to a changing environment.

And it also occurred to me that what groups involved in climate change are doing is very much akin to exploration. Not only does our changing climate represent the new territory, but the efforts that nations are making to prevent catastrophic climate change are also an entirely new way to tackle environmental problems.

To apply market mechanisms to solve an environmental problem may seem contradictory, but it speaks to one of the most powerful forces that drives mankind: its ambition, its pursuit of security and knowledge and its desire to survive. All of these are represented in market systems, and they were also forces that drove the great explorers.

Recently, a study was published that showed how close cooperation among nations in linking their carbon pricing systems could bring down the cost of reducing emissions by as much as $250 billion a year by 2030. Efficiencies of scale, as well as closely aligned regulations, are critical to achieving these cost reductions. 

This is ground-breaking research that highlights how the power of markets can be used to achieve a global good. And the idea of markets for environmental outcomes is not even new: The United States pioneered the use of markets for environmental goals when it developed the first emissions trading systems for Sulphur dioxide and nitrogen oxide emissions from coal-fired power plants in the 1970s.

This study explores the farther reaches of what may be possible if nations can agree on a clear and transparent set of standards and regulations for countries to use when setting up their carbon markets. The UN negotiations in Santiago this December will be critical to bringing to reality the exploratory work of work such as this study.

This research demonstrates how important it is that nations, as well as interest groups in the environmental space, consider the role of business. There are plenty of NGOs advocating for practical solutions to the problem of climate change, but not many of them address the concerns of the business community.

It’s not heresy to say this: whatever we may think of the global economy and its presence in our lives, business is among the most important constituencies that make up society. And as such, it has a role to play in addressing our problems.

Within the climate sphere alone, green NGOs advocate for solutions that consider science, human rights, climate justice, gender, youth, and workers. Why would it be seen as wrong that an NGO should help craft effective, efficient market mechanism regulations so that business can fully play its role?

Some may say that governments simply need to regulate carbon emissions out of existence, by imposing a tax on carbon dioxide. There are many parts of the world where that happens. Real explorers, however, are looking for ways that guarantee the environmental outcome, rather than government tax receipts.

Capitalism is often seen as incompatible with climate action; just look at the protests that are growing by the day around the world. The role of pioneers and explorers like IETA is to make the two work together, speeding up climate action by ensuring that there’s a real incentive to take action.

The integration of sustainability in Tourism Sector


Written by Jessica Dominguez, Sustainability Consultant


Today might sound presumptuous and little trivial, that in the last 50 years globally have discovered practically in parallel – the growing and exponential importance – both access to information through the Internet and social networks such as the importance of protecting our planet through our daily sustainability actions for our future generations.

Twenty years ago these two themes evolved asymptotically.

Today access to information and planet protection are common themes of current humanity. We associate with a prosperous and sustainable community that can be informed by these technologies, but also if and only if a prosperous and sustainable community is one that coexists balancing the natural resources of their environment.

While following the Paris Agreement of 2015 was visibly, and precisely through these media, the need to involve all societies for the care of the planet through sustainable actions. It was in these spaces where prevailed the need for the participation of the productive sectors, since in our current environment enjoy agglomerating and influence large production and various sectors groups, through the development of a wide range of products and services that current humanity operates and means of survival.

This is where ALLCOT zooms in this reflection that can be caused to individuals and various sectors, and we will do on these items. This zoom is to take as an example the Tourism Sector and how sustainability has been integrated into their daily activities as part of their evolutionary chain.

Undoubtedly travelers and explorers of 100 years ago are very different from travelers of 50 years ago and even admire the differences they had with travelers of our present years. The first difference may lie in the number, gender and age, very few people had the opportunity and resources to move out of his home town, and even it was only man allowed them to adulthood.

A second difference could be established in the distance that could reach on their trips and the reason that led to it, such as the case of businessmen who needed to cross oceans to get textiles, food or technology in the other side of the world, in our days those and other several products/services can be acquired without traveling and taking advantage of information technology and transportation.

If we take a giant step in this evolution of the tourism sector, one of the last differences from travelers of 100 years ago, is that the current traveler is seeking sensory experiences and travel the mere fact of being able to do and know the various geographies, cultures and ecosystems on the planet. Currently, we travel alone, in pairs, with friends, with family, with children, in groups, of course these travelers are not exclusive, but they are the majority.

The current tourism for one side add  the service provider that strives to provide and ensure this experience on their customers, and for the other side add the customers / users of tourism industry looking to acquire a distinct and noble experience as well as being in contact with nature, and of course make sure you visit to nature is not impacted.

The current challenge for builders and operators of hotels, hostels or guest houses on five continents have agreed to seek to provide a balance between meeting the needs seeking users, such as ensuring that their activities do not make any impact on resources planet and the creatures that inhabit it.

In the last 20 years the main affectations detected planet were not visibly caused by the tourism sector, however the more information there is and it comes to the different groups that make up the sector, it has been identified and expanded disclosure of the powerful magnitude its impacts and the importance to do and not to do sustainable actions for the conservation of the planet.

ALLCOT challenges you to navigate the numerous social networks and even web pages for all the world of various orders (business travel or ecotourism) and different sizes (local cabins or large hotel chains) hotels. In such sources of information, you can identify sustainable actions are without naming them such as: savings and efficient water consumption, savings and energy efficiency, including the preference of hotels that use renewable energy. The use and recycling of materials consumption during the stay from soaps to feed them they offer. And building materials employing as those with the lowest possible carbon footprint that is inclusive of local origin.

Currently, there are increasingly rating agencies that evaluate sustainable actions in various sectors and major hotel groups, where being five stars is only the elementary part to attract users more demanding, but the distinction of being sustainable hotel seeks to satisfy their own needs to perform its activities with the least impact on the planet. However, the owners offer these groups are constantly inquiring experiences to innovate and ensure that their activity is sustainable.

Nowadays, if you do not disclose your activity (in your organization), your activity is not known and therefore is inert. So for the marketing of products and services of the tourism sector, both generated and exchanged information on social networks, such as the conservation of the planet are two completely convergent themes, and is the current sustainable source of tourism business sector.

Of course, this brief reflection is the top of the iceberg of sustainability that the tourism sector has integrated naturally in its evolution as a business and activity, whose approach to sustainability was the environment for the conservation of the planet. However necessary to satisfy the needs of human beings to learn and evolve activity within the tourism sector has other social sustainability approaches.

Carbon offsets for a sustainable and decarbonized future


Written by Sergi Cuadrat, Chief Technical Officer (ALLCOT)


In 2015, leaders from the member states of the United Nations agreed on objectives to shift all economies and societies toward sustainable and decarbonised development through the adoption of the Agenda 2030 on the Sustainable Development Goals (New York, September 2015) and the Paris Agreement to limit climate warming to well below 2ᵒC (Paris, December 2015). There is enormous potential for co-benefits to arise from the mutually supportive implementation processes of the 17 Sustainable Development Goals (SDGs) elaborated in the voluntary 2030 Agenda and the Nationally Determined Contributions (NDCs) underpinning the legally binding Paris Agreement under its Article 6.

Both frameworks, although negotiated under different multilateral processes, promote the participation of all countries and are highly interlinked: the Paris Agreement emphasizes the need for considerations of sustainability in low-carbon transitions; at the same time avoiding dangerous climate change is one of the 17 Sustainable Development Goals (SDGs) defined in the 2030 Agenda on Sustainable Development. Thus, failure in one process could undermine the success of the other. The implementation of Nationally Determined Contributions (NDCs) –countries’ emissions reduction commitments– requires huge investments, which are more likely to be financed if embedded in and benefiting national development plans. While, vice versa, prospects for sustainable development depend on a limitation of global warming. This interdependency can be seen as an opportunity to move away from the discourse of two different agendas that are often perceived to be in competition, and instead pursue their implementation in a way to maximize mutual benefits.

Several carbon offset standards such as the Gold Standard and the Verified Carbon Standard are adapting their frameworks and requirements to better define a carbon mitigation project’s impacts beyond carbon reductions, and in some cases, this may lead to the creation of other tradeable instruments in addition to carbon credits. ALLCOT assesses project alignment with the SDGs to conduct a thorough analysis of the data currently being monitored and verified at the project level, to determine whether there are additional metrics that can be tracked for SDG reporting purposes.

ALLCOT is seeing an evolution in the way our clients think about carbon finance and the additional impacts their carbon investments can have. Businesses are able to articulate the benefits of their carbon project investments beyond the verified emission reduction. We believe that businesses can use carbon finance to deliver additional value through alignment with the SDGs, enabling the carbon market to extend beyond emission reductions, and play a vital role in driving a low carbon sustainable development throughout the world.

ALLCOT Group participates in the first version of the “Sustainability from Zero” event held at Biohotel, Colombia

On April 26, the first version of the “Sustainability from Zero” event took place at Biohotel Organic Suites, of the GHL Hoteles chain. The event managed to bring together the public and private sector and children in one place, to talk about sustainability and continue to involve new generations in the culture and care of natural resources.

Alexis L. Leroy, Founder and CEO of ALLCOT Group, was among the participants, along with the Ministry of Environment and Sustainable Development, the District Department of Environment of the Mayor of Bogotá, the Universidad Panamericana, the officials of the Autonomous Regional Corporation of Cundinamarca – CAR and the leaders of Sustainability of the main companies of the region.

Specifically, among the special guest speakers, who shared with the audience what it is like to lead in a sustainable manner, from each of the entities and companies to which they belong, were:

– Alexis L. Leroy, Founder and CEO of ALLCOT Group

– Ana Karina Quintero, Coordinator of Group C & PNVS of the Ministry of Environment and Sustainable Development.

– Paula Victoria Baracaldo, from PRO-REDES in the District Department of the Environment of Bogotá.

– Marco Llinás Volpe, Rector of the Panamericana University. He also served as Manager of Public Affairs and Sustainability for Coca Cola (2006 – 2015), and Director of Corporate Affairs for Nestlé (2015 – 2018).

Students from the fourth and fifth grades of elementary school from the la Salle Bogotá School, the Jonathan Swift Women’s Gymnasium and the Los Cerros Gymnasium were also present, who also participated as speakers at the event.

ALLCOT, one of the participants of the CHALLENGES AND OPPORTUNITIES FOR GLOBAL TOURISM Conference, organized by University College of Tourism of Murcia

“Every million tourists that Spain receives consumes 11 million liters of fuel, 2 million kilos of food and 300 million liters of water. And at the same time, they generate 300 million liters of wastewater, 25 million kilos of carbon dioxide and 1.5 million kilos of garbage. If Spain received almost 78 million tourists in 2017, draw your own conclusions … ”

These were some of the data explained by Federico Glikstein, Sales Director of ALLCOT, in his speech during the CHALLENGES AND OPPORTUNITIES FOR GLOBAL TOURISM Conference, organized by University College of Tourism of Murcia.

Renowned businessmen participated in this event in which they talked about how to face the new challenges and opportunities that tourism presents today, a booming sector that has to adapt to new technologies, offer new experiences to the clients and adapt to their needs and requirements.

And, precisely, as Glikstein commented, customers are increasingly demanding in terms of sustainability and care of the environment. Therefore, companies in the sector can calculate, reduce and offset the carbon emissions they generate to meet these new needs.

The other participating companies were IURBAN, ITREM, AEPT, BIOSPHERETOURISM, Grupo ORENES and WAYNABOX.