It’s quite something to unexpectedly find yourself in the eye of the storm. One day I was CEO in a niche sector, the next day I was in the middle of a heated public debate.
My sector, the Voluntary Carbon Market (VCM), and my former organization work with carbon credits and set standards for their generation. Over the 25 years I have worked with carbon credits, I have witnessed the evolution of perceptions about this once small but innovative climate solution becoming increasingly polarized – with market stakeholders arguing that carbon finance is diverting critical funding to important mitigation efforts and opponents who argue that carbon markets are a distraction from real action.
Are carbon credits good or bad?
The carbon credit debate is often oversimplified and reduced to a dichotomy between ‘yes or no’ and ‘good or bad’. We need a more nuanced discussion to decide the future of carbon credits.
The crucial question is: Can carbon markets facilitate the green transition in the long term? Carbon markets have the potential to finance the necessary transition to a low-carbon economy. Before I discuss the next steps, let me explain how we got to this point.
Carbon as a commodity
Calls for a carbon price through taxes or cap-and-trade programs have often failed to gain political support. To fill this gap, leading companies have taken action on their own – creating the voluntary carbon market we know today, an entire ecosystem of standard-setters, auditors, project developers and investors that allows companies to offset emissions and support the climate. action. The VCM has provided additional funding for critical actions on the ground and, by putting a price on carbon, albeit informally, helped companies reduce emissions. Companies that purchase carbon credits tend to be climate leaders, reporting higher annual emissions reductions and greater supplier engagement. These companies are also more likely to have ambitious, science-based goals and be leaders in emissions transparency and accountability.
The carbon credit debate is often oversimplified and reduced to a dichotomy between ‘yes or no’ and ‘good or bad’. We need a more nuanced discussion to decide the future of carbon credits.
The VCM is evolving. Critics have rightly pointed out shortcomings and areas for improvement, and there are now several major initiatives to improve integrity, including Voluntary Carbon Market Integrity Council (ICVCM) and the Voluntary Integrity Initiative for Carbon Markets (VCMI). There is also a lot of support for the VCM; last week the The US federal government has published guidelines designed to support this emerging market.
However, the VCM could have a greater impact. Reducing or avoiding CO2 emissions does not have to be the only goal. What if we saw carbon as a means to an end, and not the end itself?
Beyond accounting
Carbon crediting is based on two fundamental concepts:
- Additionality, the idea that the project would not have been implemented without the additional financing provided by the sale of carbon credits; And
- Rigorous accounting for emissions reductions or removals.
Both assessing additionality and measuring carbon are complex, requiring scientists, policy analysts, auditors and advanced technology, to name a few. In addition to ensuring accuracy and credibility, we need to redefine carbon markets to realize their full potential, ideally so that they become a linchpin in the transition of entire sectors of the global economy towards environmental sustainability.
Redefining carbon markets: catalysts for a green economy
What would ‘better’ look like? Carbon markets are already a crucial tool in our climate toolbox, but if designed right, they can act as a catalyst for the urgently needed global transition to a low-carbon, green economy. The market should still act on a ton-by-ton basis, but with a broader, more ambitious and sustainable goal.
We must stop seeing the removal or avoidance of a ton of CO2 emissions as the main goal of the market. Instead, the market should channel money into sustainable, forward-looking companies and support governments in tackling climate change.
We must design carbon markets so that the financing they generate introduces new technologies and practices, reduces costs, and builds the capacity to scale up climate solutions. This can be achieved through market forces, government regulation and other innovative support mechanisms.
We must stop seeing the removal or avoidance of a ton of CO2 emissions as the main goal of the market. Instead, the market should channel money into sustainable, forward-looking companies and support governments in tackling climate change. If we do that, carbon credits can catalyze climate action that will continue on its own, without the need for carbon finance.
Building on existing frameworks
To use carbon as a good transition tool, we need to build on market demands. In my reportI recommend methodologies designed with the green transition in mind, which means identifying when carbon crediting is no longer necessary for those sectors that can achieve long-term sustainability. I also recommend embracing government participation, especially as a way to reduce the costs of future regulations that will be necessary for activities that are not economically viable in the long term.
Reimagining carbon markets for the future
The climate crisis requires a long-term vision. Carbon markets can play an important role, especially if they are designed with greater impact in mind, not only for companies to offset emissions but also to support the green transition.
Starting today, we can reformulate our climate solutions to better prepare for the future. The carbon market, in line with our dominant economic model, must be reoriented to serve a more sustainable purpose. By doing so, we can channel finance to key sectors of the global economy, increasing our ability to support the ambitious goals of the Paris Agreement and building a foundation for long-term sustainability. Future articles in this series will provide concrete examples of how we can do this; The next article will explore an alternative way to assess additionality that takes into account the green transition and builds on many of the innovations already operational in the market.
David Antonioli is a net-zero transition consultant and was the founder and CEO of Verra. He published the first of six parts of his report on carbon markets, Financing the transitions the world needs; Towards a new paradigm for carbon marketstoday, June 4.
