Despite its flaws, I believe that the VCM is an essential tool in our climate toolkit. To ensure funding is channeled into real climate-action projects, we still must drive greater integrity and transparency. Here are four ways we can do that.
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.