Tradewater

Overview of Tradewater



Tradewater is an organization that finds and destroys ozone-depleting substances (ODS) and sells offsets to fund this process. In fact, it is the only such organization that we found selling these offsets to the public. Tradewater’s primary mission is to find and destroy refrigerants and other gases with especially high warming potential. They work worldwide to find these gases, purchase them, and subsequently destroy them. Tradewater’s revenue comes completely from the carbon offset market. It sells offsets directly to consumers on its website. Tradewater also sells larger batches of offsets directly and works with offset brokers as needed.



This report was last updated in January 2022.


Theory of Change

Tradewater has offset projects certified through both the American Carbon Registry (ACR) and Verra. Although the protocols for the two certification agencies are similar, Verra has more transparent and publicly accessible documentation on its certification process. Therefore, our analysis of Tradewater focuses on its Verra-certified project centered in Ghana.


In this project, Tradewater gathered ODS from existing stockpiles and then transported it to the USA for incineration in two separate destruction events. The project’s offset registry documentation is available here. This National Geographic piece gives more information about Tradewater’s history and projects and the figure below depicts Tradewater’s theory of change.



Mechanism


ODS destruction projects, including those conducted by Tradewater, are considered emissions avoidance, as they prevent emissions that would have occurred had the ODS leaked into the atmosphere.


Casuality


As detailed in our research on ODS offsets, we assess the causality of ODS offsets by verifying the following:


  • Conversion of ODS into less harmful substances

  • Establishing the counterfactual of ODS release into the atmosphere

  • Ensuring that destruction of ODS does not lead to more production of harmful gases

  • Accounting for the carbon footprint of the removal activities


Conversion of ODS into less harmful substances


Tradewater removes GHGs by incinerating ODS, converting them into substances with lower warming potential.


Establishing the counterfactual of ODS release into the atmosphere


Would ODS gases would have escaped in the absence of Tradewater’s project, or would they instead have been sequestered indefinitely in canisters and appliances? The Verra protocol allows projects to claim 100% of destruction when ODS are recovered from appliances at their end-of-life—meaning that Verra assumes 100% of ODS would have leaked if not destroyed—and 25% per year when they are recovered from canisters that could be sold into the market or sit unused in a warehouse. These rates are based on the Article 5 ODS Project Protocol, published by the Climate Action Reserve, a North American offset registry. We believe these are reasonably conservative assumptions. In Ghana, the majority of ODS that Tradewater destroys are from stockpiles, meaning that the 10-year cumulative emissions would total approximately 94% of the stock-piled ODS under an assumed 25% yearly leak rate.


There are no regulations in Ghana mandating that ODS is destroyed. Therefore it is assumed that the gases would not be destroyed without Tradewater’s involvement. Tradewater considers what would have occurred in the counterfactual scenario when quantifying the CO2e impact of their destruction events.


Ensuring that destruction of ODS does not lead to more production of harmful gases


Destruction of ODS may increase demand for the production of similar gases with high warming potential. According to Tradewater, this is not an issue with its program in Ghana because the captured cases of ODS have no further economic use. The appliances that use this type of gas are no longer in service, which is why the ODS is in stockpiles as opposed to being sold in the market.


Accounting for the carbon footprint of the removal activities


As part of its offset certification process, Tradewater accounts for the carbon footprint of obtaining and transporting the ODS.


Overall, we feel confident that Tradewater’s activities are reducing GHGs in the atmosphere.


Project-level additionality


Tradewater relies on the offset market for 100% of its revenue. Tradewater would not exist without the offset market, so this element of additionality is clearly achieved.


Marginal additionality


Tradewater is undertaking multiple ODS destruction projects, and could invest all offset revenue into new projects. Therefore, it is certainly plausible that each offset purchased can directly lead to additional GHGs eliminated.


However, there is some uncertainty about this assumption given that Tradewater is a privately held for-profit company. If Tradewater, via sale of offsets, is making profits above a reasonable reimbursement for the risk taken by their founders and investors, then it is possible that offset dollars are going towards profit-taking as opposed to carbon removal. In this case, not every offset purchased is truly additional, as Tradewater would likely destroy the same amount of ODS even if fewer offsets were sold.


As Tradewater’s financials are not public, it is impossible to know how much of their offset income goes into project operations versus profits. Additionally, they do not disclose the amount that they purchase the ODS for, making it difficult to conduct an independent assessment of the financial flows of offsets. In conversations with Tradewater management about this issue, they claimed that their mission is to remove as many refrigerants as possible and, therefore, that they reinvest any profit from a given project into the next project. They also claimed that their owners do not take profit disbursements above their salaries, at least for the time being, and are in the process of converting to a B-Corp. These are difficult statements to verify, and we encourage Tradewater to make their financials public. Unlike some carbon offsets that require a significant investment of capital upfront (such as grid power generation), Tradewater could likely be run as a non-profit. Tradewater claims that an organization as a for-profit company allows them to access bank loans, which are needed to finance further removal efforts. We find this argument reasonably compelling.


Permanence


When ODS is destroyed by Tradewater, emissions are permanently avoided.


Co-benefits


Besides reducing warming, preventing ODS from being released into the atmosphere also prevents ozone destruction, which can have detrimental consequences for humans and other species.


Cost-Effectiveness


Overall, we believe that the listed cost of offsets sold by Tradewater ($17/ton) is a good representation of the true cost of carbon removal. We created a simple model to explore the emissions reductions claimed by Tradewater. The total amount of CO2 averted is calculated by taking the amount of ODS actually destroyed, and converting this to a CO2-equivalent based on the global warming potential (GWP) of ODS. The calculation also includes estimates of how quickly the gas would have leaked into the atmosphere if it wasn’t destroyed (the “leak rate”) as well as emissions created in the process of transporting and destroying the gas. Although there is some uncertainty in the model parameters, notably the GWP and leak rate, the calculations for Tradewater’s offsets use standard, approved assumptions that we believe are reasonable.


The actual cost to do the destruction is murky, and we were not provided with exact financials for Tradewater’s projects. However, given the claim by Tradewater that offsets are their only source of revenue, we think that the stated cost of $17 per offset is a realistic cost estimate.


Conclusion


Overall, we believe the offsets offered by Tradewater are highly credible and that purchasing Tradewater offsets has a direct link to decreasing the amount of GHGs in the atmosphere.

Our main concern is that Tradewater is a for-profit company, and therefore could claim offset revenue as profit instead of reinvesting it in further ODS removal projects. We urge Tradewater to make their financials public in order to reassure offset buyers.


We thank Tim Brown, CEO of Tradewater, for a series of conversations that informed this document.