Government officials, conservation organisations and industry groups have sought to revive confidence in the unregulated voluntary carbon market at Cop28 amid concerns it does little to mitigate the climate crisis or the destruction of nature.
Supporters of carbon markets say that through buying high-quality credits, countries and companies can transfer some of the billions of dollars required to fund nature-based solutions, support Indigenous communities, phase out coal power, and pay for new renewables in developing countries. Initiatives are under way to certify successful carbon projects and curb greenwashing claims from companies that buy credits, although there is disagreement about the appropriate role of offsets in a company’s sustainability efforts.
The sector is wrestling with human rights concerns, evidence that many carbon credits are largely worthless, and a lack of clarity about financial flows. Demand for carbon offsets has collapsed in recent months after peaking at $2bn in 2021. Many speculators could lose billions following the slump as major companies drop “carbon neutrality” claims using offsets.
At the climate summit in Dubai, the US climate envoy, John Kerry, the EU commission president, Ursula von der Leyen, and the former UK prime minister Tony Blair were among those throwing their weight behind efforts to revive the market as a way of funding environmental action. While acknowledging flaws, Kerry told a Cop28 event that it could become “the largest marketplace the world will have ever known”. The World Bank president, Ajay Banga, told an event with von der Leyen that there was no other way for scaleable resources to reach developing countries.
Blair spoke at an event with the Guyanese president, Irfaan Ali, in support of selling carbon credits derived from protecting Guyana’s forests. Guyana is one of the few Amazon countries to have kept the vast majority of its forest intact, and it has signed a $750m carbon credit deal with the US petroleum company Hess Corporation, although questions have been raised about the environmental benefits the credits represent.
Concerns have also been voiced about the role of carbon markets in formal climate talks. Ahead of Cop28, an EU memo raised concerns that the US was pushing voluntary carbon market initiatives for formal inclusion in the Paris agreement’s carbon market which, it warned, could undermine the ambition of efforts to limit global heating.
Judith Simon, the president and interim CEO of the leading carbon credit certifier Verra, which was the subject of a Guardian investigation into poor quality carbon credits from their rainforest protection scheme, said the market was at an inflection point.
“One big story of this climate conference is the agreement among standards organisations, international bodies, civil society, governments, and corporations – that an effective carbon market is an irreplaceable and critical component of addressing the climate challenge. The carbon market is at an inflection point, and it deserves a scientifically robust assessment to support its continuous improvement and ultimate success,” said Simon.
The Washington based non-profit is teaming up with the Climate Crisis Advisory Group, a group of researchers including Sir David King, Johan Rockström and Mariana Mazzucato, to use the latest science to build trust in the market for climate and biodiversity impact. They are also transitioning to new rules on approving rainforest carbon credits.
Johan Rockström, the director of the Potsdam Institute for Climate Impact Research and chief scientist at Conservation International, which manages a number of carbon offsetting projects, said carbon markets could be reformed.
“It’s an important and difficult question because it doesn’t have a simple answer. On the one hand, the voluntary carbon markets on nature are not working and there’s reason to be deeply concerned about how they are misused as offsetting mechanisms for companies that are not following the scientific pathway on fossil fuel phase-out. On the other hand, we need nature-based solutions more than ever. We need finance more than ever and we don’t have another mechanism. It’s almost a contraction in terms. Many of us in this field feel like we have one foot in each camp,” he said.
“You can no longer just allow yourself to plant trees as a way of hiding your inability to follow the scientifically based fossil fuel phase out plans,” Rockström added.
Leading conservation NGOs and industry groups have said that companies that buy carbon credits are largely doing so alongside emissions cuts and are not using offsets as a reason to keep polluting. The industry watchdog Carbon Market Watch found that there was little evidence of a causal link between corporate purchases and their decarbonisation rate.
It comes amid a renewed push for an expanded role for offsets in corporate climate claims through the UK government-backed Voluntary Carbon Markets Integrity Initiative (VCMI), which certifies corporate claims. Before the summit in Dubai, it said it was trialling a certificate on using credits for scope 3 - or indirect - emissions, prompting concern from some in the sector that it would allow companies to use offsets instead of cutting emissions. The New Climate Institute warned it could turn the clock back on corporate climate change action.
Margaret Kim, the CEO of Gold Standard, which also certifies carbon credits, said emission cuts from businesses had to come first.
”The voluntary carbon market (VCM) can drive genuine change, catalyse investment in the global south, enhance people’s lives and drive real emission reductions. But we must use credits as a complement to corporate decarbonisation, rather than a substitute, including for scope 3 emissions. Business must do the hard work of reducing emissions throughout their value chain in line with science-based targets, transforming business practices where needed, while simultaneously taking responsibility for those [emissions] they cannot yet eliminate,” she said.
