The voluntary carbon market (VCM) has been in the headlines recently for
all the wrong reasons. Questions over methodologies, inaccurate claims and lack
of
transparency
are creating serious concerns about the integrity of the market — causing many
to lose faith in the potential of carbon
offsetting
to have the necessary impact on carbon emissions. This decline in confidence in
the market has made many companies hesitant to use carbon credits — with less
than a quarter of 137 global companies
surveyed
late last year planning to use carbon credits as part of their net-zero
strategies going forward.
However, given what we need to achieve in terms of climate action across all
levels of society and so many nature-conservation and -restoration
projects
that need funding and
investment,
it’s not the time to abandon the voluntary carbon market.
Despite its flaws, I believe that the VCM is one essential tool in our climate
toolkit — one that can drive much-needed investments in climate projects. It is
not a way out of reducing emissions nor transforming supply chains; however, it
can be used by companies to take responsibility for their residual emissions,
once they have reduced their controllable emissions.
To ensure the markets channel finance into real climate-action projects, we
still need to drive greater integrity and transparency. Here are four ways we
can do that:
Shift from carbon offsetting towards measured climate impact
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I believe we need a new model for companies to claim their contribution towards
reducing carbon emissions. Shifting the emphasis from carbon neutrality to
measured climate impact is one such approach that would help the carbon market
do what it’s supposed to do: accelerate substantive climate action.
This requires progressing from the idea of simply offsetting carbon emissions
towards an approach that focuses both on reducing emissions at their source —
rather than just compensating for them — and on claiming one’s measured
contribution to climate impact. This would take into account the broader impact
of a company's actions on ecosystems and the climate; and requires a
comprehensive
effort
to reduce greenhouse gas emissions, restore
biodiversity
and promote climate
resilience.
Once a company has decarbonized as much as possible, it can invest in climate
impact to balance out its so-called residual emissions (those it can’t eliminate
yet). This means companies openly taking responsibility for residual emissions
and financing climate actions in an equivalent amount elsewhere. Instead of
offsetting and then claiming carbon neutrality, companies would instead claim
their actual, measured contribution to decarbonization — first, through reducing
their own controllable emissions and then investing in climate projects to make
up for hard-to-abate, residual emissions.
Such a transition requires substantial scaling of market and policy mechanisms
that incentivize
decarbonization.
Two-thirds of countries globally have committed to using market mechanisms to
deliver on their Paris Agreement targets; so, carbon markets are clearly a
key component of this transition. If we can make the markets more credible, they
can be used to channel funding towards much-needed climate-impact initiatives —
notably, those that struggle to access finance or do not fall within company’s
supply chains: think regenerative
forestry
or other community projects, for example.
Raise standards, consistency and regulation
The Integrity Council for the Voluntary Carbon Market — the "standard of
standards" for the VCM — released its Core Carbon Principles and Assessment
Framework a month ago, outlining
a standard for “high-integrity” carbon credits that are credible and
trustworthy.
Among these suggestions is the need for robust, independent, third-party
validation and verification, more effective tracking and increased transparency.
While there have been questions over whether these new principles and framework
go far enough to drive higher integrity, there are clear benefits to having one
consistent reference benchmark across the market; I expect this will help raise
the bar. The availability of higher-quality credits is expected to translate
into higher prices — which, in turn, should incentivize more companies to
decarbonize their own operations.
Scale technologies that improve the accuracy — and therefore credibility — of VCM claims
To deliver impact at scale with the carbon market, we need to digitalize the
industry
fast. Getting accurate data is often a hurdle, because it can be difficult to
accurately measure and verify the amount of carbon being sequestered or reduced
by a project — leading to discrepancies between reported and actual carbon
savings.
Technologies including digital monitoring, reporting and verification software,
as well as ‘on the ground’ sensors and drones can help to ensure that the
project data gathered is as precise, reliable and timely as possible. In turn,
this will increase the speed, accuracy and frequency at which carbon credits can
be verified and issued.
Stay humble and embrace the science and learning
Last, but certainly not least: I’m a firm believer that actors across the sector
will need a good dose of humility to bring more integrity to the voluntary
carbon market. By acknowledging our sector’s
flaws,
we can solve its very real issues going forward — namely, making sure carbon
offsets actually contribute to reducing GHG emissions, and channeling resources
and investment to essential regeneration
projects.
We need to understand and be honest — we haven't yet seen everything that can go
wrong with carbon markets. However, as science and technology advances, we will
only continue to be more knowledgeable and accurate.
A continuous-improvement mindset is essential to cleaning up the voluntary
carbon market. Companies on their net-zero journeys should be transparent and
honest about their progress — and the challenges along the way — so that
solutions can be identified more quickly. Rather than look for perfection
(which does not
exist),
we should instead focus on impact, continuous improvements and following a
science-based approach.
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Marion Verles is CEO of SustainCERT, a global carbon impact verification organization developing digital verification solutions to bring credibility to corporate climate action.
Published May 8, 2023 2pm EDT / 11am PDT / 7pm BST / 8pm CEST