Voluntary carbon markets are growing rapidly but where credits or the claims made by buyers lack integrity and quality, this could undermine global climate action and development.
Christiana Figueres, a key architect of the Paris Agreement, recently wrote that trust as an essential resource in our collective response to climate change is still scarce.
The approval of rules for carbon trading involving countries under Article 6 of the Paris Agreement, which was granted at COP26 last November, has fuelled VCM momentum.
This could complement other forms of finance and help direct flows from prospective buyers in the Global North to meet substantial investment needs in emerging and developing economies.
Recent research into the Clean Development Mechanism – which enabled carbon trading under the Kyoto Protocol – found most Indian wind farms financed with credits would likely have been built anyway.
Reductions, provided through avoided deforestation or through renewable deployment, for instance, can contribute to global decarbonisation but will not be sufficient on their own to reach net zero; removals via nature-based and engineered solutions will need to be much more commonplace than they are now.
For example, when Compensate, a non-profit organisation that helps buyers find ‘good’ offsets, screened accredited carbon capture projects against its own set of evaluation criteria developed with scientific experts, nine out of 10 failed its test.
Buyers should reduce their own emissions as much as possible first, and then offset where other options are not available; credits must not supplant investment in mitigation within companies’ operations and value chains.
Out of approximately 4,000 organisations surveyed in the Net Zero Tracker, the vast majority did not specify any conditions for using offsets.
Activists protested at an event at COP26 hosted by the industry-led Taskforce for Scaling Voluntary Carbon Markets , calling the taskforce a ‘scam’ for the way offsetting gives polluters a way around making deep emissions cuts.
Some indigenous communities oppose markets while, perversely, those seeking finance can be shut out by additionality standards, since their stewardship of resources may be deemed likely to have happened anyway.
The TSVCM-backed Integrity Council for Voluntary Carbon Markets will define ‘core carbon principles’ for demonstrating integrity, aiming to drive alignment across all accrediting standards.
The London School of Economics and Political Science used Compensate’s service to purchase offsets for its own claim to carbon neutrality.
Unless consumers and investors know how to differentiate between good and dubious climate claims, companies and institutions will not have strong incentives to use high-quality offsets.
In the VCM era, when all forms of climate finance must increase rapidly – including national public budgets, bilateral and multilateral development finance, and other private lending and investment – ideally that niche should be where others cannot reach.
Therefore, beyond standards, VCMs could benefit from mechanisms to connect buyers with projects at the frontier of countries’ climate strategies.