Carbon markets entice, but confuse, corporations: Report
By John Cannon Corporations see investments in voluntary carbon markets as a key part of their climate strategy, according to a new report from the environmental nonprofit Conservation International and the We Mean Business Coalition, a partnership of climate NGOs. Both are based in the U.S. Voluntary carbon markets provide businesses with the opportunity to buy credits that, in theory, compensate for their own carbon emissions by, for example, reducing deforestation in another part of the world. Carbon trading was a widely discussed topic at the recent U.N. climate conference, COP27, in November 2022. Some see it as a critical step toward reaching the goal of net-zero global emissions by 2050. Others criticize the strategy as a way for companies to continue to pollute while offloading the responsibility of mitigating climate change elsewhere, often to less-industrialized, forest-bearing countries in the tropics.
Companies’ interest in investing in carbon markets has “increased dramatically” in recent years, alongside “an understanding of the role that carbon finance or carbon market finance can play in some of the trickiest problems that we have conserving tropical forests and other natural environments,” said Mark Kenber, executive director of the Voluntary Carbon Markets Integrity Initiative, or VCMI, at a press briefing ahead of the report launch.
At the same time, interested companies don’t always know where to start, said Luke Pritchard, nature-based solutions manager with the We Mean Business Coalition.
“What we’ve recognized over the last couple of years is that there’s growing confusion from companies in terms of how they engage credibly with markets and how they do it in a high-integrity way,” Pritchard said during the briefing.
Some see carbon trading as a way for companies to continue to pollute while offloading the responsibility of mitigating climate change elsewhere. Image by Daniel Moqvist via Unsplash (Public domain).
The report’s authors surveyed 502 managers in charge of sustainability at companies in the U.S., U.K. and Europe about their approach to addressing climate change.
More than 90% of the companies that responded called the reduction of their carbon emissions “an urgent priority for their organizations,” according to the Jan. 12 report.
Pritchard said most of these companies are working to both lower the amount of carbon they produce and use carbon markets to offset the emissions they can’t do away with immediately.
“The foundation for any company taking leadership on climate is to take responsibility for their own operations and their own value chain,” he said. “But I think we also recognize that that alone isn’t going to be enough and that carbon markets are a tool that, if they’re used appropriately and if we have the right guardrails in place, are going to play … a critical role in that transition towards net zero.”
For some industries, the technology isn’t yet advanced enough, or doesn’t exist at all, to reduce or eliminate carbon in their operations, said Agustin Silvani, senior vice president of conservation finance at Conservation International. That leaves them with a choice of what to do about these “unabatable” emissions.
“They can either choose to do nothing until the technology comes online, the solutions come online, or they can … invest in offsets right now,” Silvani said at the briefing. “The surveys show that the vast majority of companies see it that way, so that’s very encouraging.”
A restored mangrove forest in Thailand. Image by Troup Dresser via Flickr (CC BY-NC 2.0).
Pritchard acknowledged that the sample of companies represents those that are already interested in addressing their part in climate change.
“These are certainly the leaders,” he added. “Certainly, if they have senior-level sustainability managers in place, it means that they’re taking this issue seriously.”
But the report also surfaced trepidation on the part of the companies to ensure the credits they buy actually make a difference.
“They want to make sure that they’re engaging in a credible way and in high integrity,” Pritchard said.
A recent investigation by The Guardian newspaper suggested that more than 90% of carbon credits issued by Verra, the leading standard for offsets, were “worthless.” In response, Verra said the credits had resulted in meaningful reductions of deforestation that did amount to carbon being kept out of the atmosphere. Other scientists criticized the methods that The Guardian reporters used to reach their conclusions and questioned their interpretation of the research on which they built the story.
On Jan. 30, 49 environmental organizations, industry groups, investors and other parties published an open letter in response to the investigation supporting carbon markets.
“The carbon credit market alone will not solve climate change. Not all credits deliver the climate benefits they claim. These two facts are not disputed,” they wrote. “But they also do not mean that offsetting should be totally abandoned and that any engagement with carbon markets is greenwashing. Carbon credits are one of the few mechanisms we currently have for funding the wide-scale conservation of natural carbon sinks and wider climate solutions.”
The letter refers to carbon market investment as “no-regrets actions that companies can take now.”
Windmills in India’s Western Ghats. Image by Nikhil Verma via Flickr (CC BY-SA 2.0).
Still, with such concerns swamping the public discussion around carbon credits, companies don’t want to invest in meaningless offsets or be criticized for greenwashing their operations — a charge that many are leery of facing, according to the report.
“In the media, [there] has been a lot of backlash against companies that are investing, and we need to make sure that the good ones actually stand out as good ones,” Giulia Carbone, director of a group of businesses and NGOs called the Natural Climate Solutions Alliance, said during the briefing.
To address those concerns, the We Mean Business Coalition released a set of “guiding principles on corporate climate leadership” in December 2022, Pritchard said.
“Remember, of course, that science-based targets don’t tell you how to get to your target,” he added. “They tell you what your target needs to be in each company. And each sector needs to figure out what that transition looks like.”
Kenber said 2023 will likely be a year that brings clarity to questions around carbon markets so that both the public and the companies investing in credits understand what role they play in moving toward climate mitigation goals. He noted that both the VCMI and the Integrity Council for the Voluntary Carbon Market aim to release guidelines to increase the credibility of credits sold through these markets.
“Nobody’s saying that the outcome will be perfect,” Silvani said. “But we think we’re on the way of achieving the solutions that most people can agree on.”
John Cannon is a staff features writer with Mongabay. Find him on Twitter: @johnccannon
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