An old-growth forest in Madre de Dios, Peru, where deforestation continued despite REDD+ carbon credits, on July 4, 2023. Angela Ponce for The Washington Post via Getty Images
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After multiple scientific studies showed that carbon offsets are not as reliable as once thought, the market value of carbon offsets has fallen by about 61% compared to its near-peak value in 2022, a new report shows.
In early 2023, a major investigative report from The Guardian, Die Zeit and SourceMaterial found that the vast majority of carbon offset programs for forests are in fact ‘phantom credits’ that do not help remove emissions from the atmosphere. A 2022 study that analyzed forest-based carbon offsets in California over a decade found no climate benefits from the offset programs over that period. Yet another study, published in March 2023, found that many carbon offset programs did not use scientific best practices to calculate carbon credits, leading to overestimations of the benefits of these programs.
Now, a report from the nonprofit Ecosystem Marketplace found that the value of the voluntary carbon market (VCM) fell by 61%, from $1.9 billion in 2022 to about $723 million in 2023. The market value for carbon offsets peaked around 2021 , when its value reached more than $2 billion.
Since peaking, the value has fallen about 56% year over year, Ecosystem Marketplace found.
Experts noted that for carbon offsets to work, more reliability and action from carbon credit programs will be needed.
“If the VCM hopes to increase its mitigation potential and the value it provides to ecosystems and communities, especially those where [The Nature Conservancy] projects, it is imperative that the credit supply demonstrates its integrity by shifting towards methodologies that use the best available scientific and social safeguards,” Maximiliano Bernal Temores, Carbon Markets Assistant, Impact Finance & Markets at The Nature Conservancy, said in a press release.
“Credit standards and project developers must integrate best scientific practices such as dynamic baselines and remote sensing to ensure that VCM, especially nature-based credits, meet buyer expectations,” Temores added.
The once most popular credit type, REDD+, saw the largest losses in 2023 REDD+ stands for “reducing emissions from deforestation and forest degradation in developing countries” and is based on a United Nations framework.
But in 2023, researchers found that several REDD+ carbon credit projects in Peru, Colombia, the Democratic Republic of Congo, Tanzania, Zambia and Cambodia little has been done to combat deforestationand these projects had a much smaller impact on emissions reductions than they claimed, Forests News reported.
“The media research showing that many projects providing Redd+ credits to the voluntary carbon market have sold more credits than justified is important,” said Julia Jones, a professor at Bangor University and co-author of one of the studies cited in the joint carbon credit investigation by The Guardian, Die Zeit and SourceMaterial. “However, I am deeply concerned that some of the recent reporting on this issue gives the impression that the very idea of tackling climate change by slowing tropical deforestation is a scam – this is not true and the idea could destroy forests harm.”
The research into carbon credits and the recent report revealing the demise of their market value highlight the need for change in the industry to raise money for truly useful projects.
“More financing is urgently needed to halt the ongoing loss of forests and the essential services they provide – a reformed voluntary carbon market could play a key role in providing that financing,” Jones told The Guardian.
This week the Biden administration announced supporting carbon credit reforms, promoting “high integrity voluntary carbon markets” and noting that projects must “represent true decarbonization” and avoid causing damage to the environment.
However, it will also be crucial that the world takes action to reduce emissions, beyond relying on carbon credits, which critics have warned can be used by the wealthy to continue polluting.
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