Sustt: Carbon credits – pointless pollution permits or emissions silver bullet?
For decades, the voluntary carbon market (VCM) has faced scepticism for its perceived vacuity and the recurring threat of corporates exploiting the market for greenwashing purposes.
To get an idea of the long-standing mistrust it has faced, just read this 2006 article by environmental journalist and activist George Monbiot who compares carbon offsets to wealthy medieval sinners paying the church to absolve them of their guilt...
But is this perception justified? This week, Sustt takes a look at some of the latest developments in the world of carbon credits and the wider VCM...
📊 Chart of the week - a collapsing market?
According to Ecosystem Marketplace's State of the Voluntary Carbon Market 2024 report, the carbon offset market dramatically shrank in 2023, falling from $1.9bn to $723m. This massive 61% decline followed a flurry of scientific studies and media reports depicting many offsets as "worthless" or linked to human rights concerns. Rainforest protection schemes, the most popular offset type, lost 62% of their value. Despite the market's contraction, experts argue for market reform rather than complete abandonment. (The Guardian)
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📰 Bite-sized insights – the latest carbon credit headlines
✍️ Big Tech and the VCM
🛢️ Oil giant turned carbon credit dealer – In a deal that may raise a few eyebrows, tech giant Microsoft and oil conglomerate Occidental Petroleum have signed a record carbon credit deal worth hundreds of millions of dollars. Occidental will sell 500,000 carbon credits to Microsoft over six years, allowing Microsoft to offset emissions by paying for atmospheric carbon removal and underground storage via Occidental’s direct air capture (DAC) facilities. Occidental, the US' fourth-largest oil and gas producer, is expanding its carbon management in the form of subsidiary 1PointFive. The tech sector is a priority for 1PointFive given the industry faces a clean power deficit as AI systems grow in scale and sophistication. (Financial Times)
💻 Google offloads its offsets – In its latest environmental report, Google announced it has ended its practice of purchasing cheap carbon offsets to claim carbon neutrality. The company now aims for net-zero carbon emissions by 2030, focusing on absolute emissions reductions and carbon-removal initiatives. The shift follows news that Google's emissions have risen 48% since 2019, thanks in large part to (you guessed it) AI's rapid development. Google has also committed to the Science-Based Targets initiative, joining other companies in changing their carbon credits strategy. (Bloomberg)
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📈 Market conditions
📉 A saturated market – Carbon removal start-up Running Tide's closure is symptomatic of the myriad challenges facing the nascent industry. With over 800 startups in the field, many are expected to fail due to lack of demand and high costs. The VCM's focus on cheap offsets hinders growth of more verifiable, expensive removal methods and the sector faces oversupply and insufficient buyers. Future success may depend on cost reduction and increased government support. (Bloomberg)
Listen to the full Bloomberg Zero podcast episode covering this topic here.
🗣️ Calls for reform – Leading scientists have concluded that the carbon credit market must undergo comprehensive reform or face obsolescence. The Climate Crisis Advisory Group (CCAG), led by Sir David King, recommends adopting rigorous scientific standards, ensuring financial benefits for local communities, and prioritising carbon-removal projects. While the industry faces challenges, reforming the VCM could potentially generate billions for climate and biodiversity action. The report, funded by market regulator Verra, calls for urgent changes to regain trust and maintain relevance. (The Guardian)
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🔎 In-depth insight
Carbon market opposition
Non-profits call for carbon credits to be excluded from transition plans
✍️ Written by Nicola Watts : "The last 12-18 months have been tricky for the voluntary carbon market - a growing number of reports exposing the ineffectiveness of various projects to tackle the climate and biodiversity crises have really focused scrutiny on the market. The below story is just the latest in a long list of bad press. For what it's worth, I believe the VCM can have a positive impact, but as with many markets, is vulnerable to abuse and exploitation by certain parties. Improved market governance will be key to overcoming this."
What's happening? A group of more than 80 non-profits, including Greenpeace, Client Earth and ShareAction, have issued a statement urging carbon offsetting to be excluded from voluntary and regulatory climate transition frameworks. They argue that 78 companies are responsible for over 70% of historical greenhouse gas (GHG) emissions and must reduce their emissions without relying on carbon credits. Their letter outlines four key concerns about carbon offsetting, suggesting that it delays climate action, lacks credibility, has insufficient high-quality credits and creates a misleading perception of cheap abatement options. They also warn against creative accounting and distractions from real emission reductions and that concrete measures are needed within global value chains. (edie)
Why does this matter? The group’s letter is in response to what they describe as a “growing push” to allow carbon offsetting as a way for companies to address their emissions. In particular, they point to the Science Based Targets initiative’s (SBTi) announcement that it plans to permit the use of carbon credits to tackle Scope 3 (indirect) emissions, with a draft of the new rules expected imminently.
Mixed reception – Some welcomed SBTi’s intention, suggesting that it could create new demand for offsets and boost investment for climate projects following a downturn resulting from a series of scandals and lawsuits that created nervousness among buyers. Others, such as the above group, have slammed it, including SBTi staff and advisors who called for the statement to be withdrawn and for CEO Luiz Amaral to resign...