Three things that would insulate the carbon market from further damaging exposés
Author: Anton Cartwright
23 January, 2023
I have lost track of how many people have forwarded me the Guardian “reveal” about most (90%?) of Verra’s avoided deforestation credits being an illusion. Some forwarders are curious, others are angry, there is quite a bit of ‘told you so’-ism and some straight schadenfreude.
I like trees but have always been nervous of the claims being made about forest carbon. I do however have some sympathy for the people at Verra, some of whom I have met. Given the regulatory soup that is the global carbon market at the moment, an exposé like this has felt inevitable for some time. Too many standards, claims and counter claims, combined with some bullish new market players has made it increasingly tricky to know what constitutes a carbon credit or to defend or refute what is being transacted as carbon credits.
We note that Verra has challenged the Guardian’s findings and expect that this will rumble on. As a smaller regional standard and registry, Credible Carbon tries to remain innovative and to get as much money as possible back to projects that support a just climate transition by cutting emissions and reducing poverty. We have the great advantage of being able to visit each of our projects regularly and keeping an eye on their progress. Verra set out to write one rule book for all projects everywhere. That was always going to be difficult but their size and influence means the general impact of the recent news will undermine trust and confidence. The uncertainty, and associated transaction costs, will be great for consultants and lawyers but terrible for projects and market development.
As the “rules of the [carbon market] game” get visited and revisited in the wake of this recent news, it is worth noting three simply guidelines that would remove much carbon risk and help the global carbon market play its proportionate role; three easy to enforce guidelines that would demarcate a much safer space for carbon markets.
- Nobody should be forward trading credits. So much carbon risk could be avoided if projects only got paid for historically avoided emissions that can be more easily verified. Radical uncertainty is a feature of our current time and while this need not signify the end of market transactions, it requires extreme caution when letting companies use offsets to meet their targets now based on something that will happen in year to come.
- Companies should not be allowed to offset more than 10% of their emissions between now and 2050. On this score South Africa’s carbon tax and offset guidelines set the global standard; 10% is adequate to mobilise significant investment for a green, low-carbon and socially inclusive projects….about the amount of investment that these projects can safely absorb at the moment. More importantly, as the CDM revealed prior to 2012, carbon markets need to be one a suite of instruments used to achieve global net-zero by 2050, not the only show in town. Through this step, carbon markets will find a healthy overlap with the recommendations of Science Based Targets.
3. The United Nations must re-enter the carbon market as the uber-regulator. Since 2012, and the effective ending of the Kyoto Protocol and the Clean Development Mechanism, the global carbon market has been operating in a regulatory vacuum. The vacuum has been irresistible for NGOs to fill. But each NGO has brought their own rule book, entry fee and process. The result has been competing and confusing standards, disproportionate global influence for un-elected (even if well-meaning) NGOs and higher barriers to market entry for projects. Article 6, which entered into force at the end of 2021, allows respective governments to describe how they will apply these rules to engage the global carbon market and address domestic priorities. The United Nations should provide the high level rules and then countries and regions must take up the opportunity to shape domestic carbon markets to give them what they need. They should do this mindful of what constitutes an internationally credible offset offering, but without the influence of existing NGO standards.