Dynamic vs Static Accounting

What does it mean and which one is better?

Dynamic and static accounting of climate projects are two very different concepts on how to measure carbon impact. Carbon credits are based on static accounting whereas carbon shares are based on dynamic accounting.

We think dynamic accounting is one of the biggest advantages carbon shares hold over carbon credits. This proves to be true especially in regards to nature-based climate projects

Static accounting

Static accounting is called static because once the accounting is done it's result is unable to change. Carbon credits are accounted statically. A carbon credit is always worth 1t of CO2e regardless of how much CO2e is actually stored in the project. This is a big issue for nature-based projects because they can be very volatile in the amount of carbon that is being stored.

E.g., a reforestation project issues a 100 carbon credits all worth 1t of CO2e. But then the forest gets cut down and this is where the issue with static accounting starts. There are still a 100 carbon credits out there, all saying that they are worth 1t of CO2e, whereas in reality they are practically worthless.

Dynamic Accounting

The dynamic accounting off Carbon Shares is called dynamic because the measured results are able to change over time. This means that the amount of tons per Share rises when the project performs well and declines if the project performs worse. This makes them ideal to display the volatility of nature-based projects.

Let's have a look at the same example as above: A reforestation project issues a 100 carbon shares all worth 1t of CO2e but then the forest gets cut down. Our carbon shares would be able to adjust their value accordingly to the amount of carbon that is still stored in the project.