Published 2 years ago.
About a 5 minute read.
Carbon credits, which promise an impact measured to a specific quantity of CO2, may not be the most efficient instrument in constantly climate-changing world. But a new approach can make carbon markets fit-for-purpose moving forward. Here are some key premises for business to finance forests and broader climate action in a new era.
Recent headlines about forest fires from Turkey to Canada to
California have drawn attention to the complexities associated with carbon
has been an effective tool to enable the private sector to help close the
ambition gap left by
It has helped the renewable energy market reach a tipping point to financial
viability in middle-income countries. It has enabled the distribution of clean
to some of the nearly three bilion people who cook with dirty, inefficient fuels
across the developing world. And it has been an innovative laboratory for
financing conservation and restoration of forests — which has important outcomes
not only for climate, but often also for local communities and biodiversity.
Yet it’s underappreciated that carbon offsetting relies on a very strict set
of rules that must be upheld to claim confidently that a tonne of CO2 has
offset or compensated for an emission elsewhere. A number of those rules are
particularly challenging in forestry but could be solved by innovations in how
we incentivize forest conservation and restoration.
The first is permanence. Greenhouse gas emissions remain in the atmosphere
for hundreds of years. To claim to have offset that climate impact, the forest
carbon must be stored at least that long. Forests can store CO2 in organic
matter; but like all living ecosystems, they are by definition ‘impermanent’ —
that is, they face multiple threats to their survival, both natural and
man-made, and thus to the carbon they store.
To safeguard against this risk, all the major carbon standards including Gold
Standard have ‘permanence buffers’ that require
a percentage of all carbon credit issuances to go into a kind of insurance
policy in case a forest burns down — as in the case of the Bootleg
in Oregon — or if it’s affected by disease.
Even with standards’ provisions of 50-100 years of permanence, will anyone be
around to keep that promise? And though permanence buffers address the risk
today, aren’t they likely to be put under greater pressure with climate change
increasing risks of fire and disease?
This doesn’t mean that the efforts do not deliver positive impact for climate,
nature and society. It only means that specific claims to have offset,
compensate or neutralize GHG emissions — the most common claims used today in
the voluntary carbon market — may not be tenable over time.
The second rule is real and accurate baselines. This is particularly
challenging to the vast majority of forest carbon credits, which come from
avoided deforestation efforts or REDD+ projects. While some other carbon
offsetting project types rely on a counterfactual scenario to quantify the
impact of the project, in the energy sector this is straightforward to measure.
When setting a REDD+ project baseline, the
counterfactual assumption is an expected amount of deforestation that would
happen in absence of the project’s protection. Again, carbon standards have
guidance to estimate conservatively. But this is virtually impossible to
predict, meaning it’s virtually impossible to quantify a precise number of
tonnes of CO2 mitigated.
This doesn’t mean that it isn’t really important to finance conservation,
particularly given the lack of other incentives to do so. It only means that
carbon credits, which promise an impact measured to a very specific quantity of
CO2, may not be the most efficient instrument.
The final rule is to ensure a unique claim. This is relevant for any project
type, not only forests. While discussions on this topic quickly become
technocratic, the short story is that due to the nature of the Paris
Agreement, it will become more difficult over time to ensure that the climate
impact of a carbon credit is uniquely claimed by a single user — the end buyer.
This doesn’t mean that we don’t urgently need the private sector to fund
verified emission reductions to help close a massive emissions gap. It simply
means that we need to accommodate the reality of the new, blurry lines between
national commitments and corporate action.
A new approach is possible. We can leverage all the strengths of carbon markets
robust quantification of impact and independent verification — while making the
system fit-for-purpose moving forward.
Innovate on how to value the impact of avoided deforestation. Storing
carbon is important, but the beyond-carbon benefits of conserving standing
forests arguably dwarf any carbon ledger. Companies should incorporate
nature and/or deforestation targets that are taken as seriously as their
Better acknowledge impermanence. Climate action is needed now. Even a
couple decades of carbon sequestration and protection of standing forests
buys us crucial time to mitigate the climate emergency.
Reimagine claims. This can solve many of the issues discussed here.
Instead of a binary ‘carbon offset’ claim, companies can describe in more
detail what efforts they have funded and what impact it has delivered.
WWF’s Blueprint for Corporate Action on Climate and Nature,
summarized in the graphic, points in this direction. More practical detail is
still needed on how to price emissions appropriately, how to best allocate that
finance across various efforts, and indeed which efforts and mechanisms,
including carbon credits, are most effective.
Companies are also looking for clarity on the claims they can make in various
cases — to avoid greenwashing and to be recognized for ambitious voluntary
Image credit: WWF
For our part, Gold Standard works with partners to provide this clarity in an
integrated framework that provides guidance for making this blueprint actionable
and a clear set of claims that make this higher level of ambition not just the
right thing to do, but a way to build real value for organizations committed to
sustainability. Watch this space …
Published Oct 6, 2021 8am EDT / 5am PDT / 1pm BST / 2pm CEST