Controversial credits bought by corporations to offset their carbon emissions will be in the spotlight at UN climate talks next month.
These credits allow them to label everything from shampoo to air travel as “carbon neutral”. Carbon credits have been debated since their inclusion in the 1997 Kyoto Protocol. But their reputation was hit hard this year when several scientific studies and investigative reports questioned the credibility of the lucrative voluntary market, which lie outside the UN process.
“The absence of standards, regulations and rigour in voluntary carbon market credits is deeply concerning,” UN Secretary General Antonio Guterres told the COP27 climate conference last year.
Carbon credits are derived from projects that claim to absorb or store CO2 through their implementation. That could be anything from fighting deforestation, replacing wood-burning stoves, or replacing coal-fired power plants with wind turbines.
One credit equals the reduction or removal of one tonne of CO2 from the atmosphere, and companies can buy these credits to “compensate” for their carbon footprint.
That, at least, is how it looks on paper.
The climate talks starting in November will try to iron out these details for states to enter the carbon-offset market, despite the concerns of researchers.
Restoring credibility
COP28 host the United Arab Emirates has said it hopes for progress during the Dubai conference to “get credibility in the markets”.
“Since I’ve been studying carbon offset quality for over two decades, quality has been consistently poor and very poor,” director of the Berkeley Trading Project Barbara Haya told AFP.
Haya and her team carried out a study on averted deforestation.
They concluded that emission reductions and the benefits of the projects had been “exaggerated” and had often violated the rights of local populations.
There was no guarantee project inspectors were independent and the practices of carbon credit certifiers such as Verra and Gold Standard were lax, they said.
“All participants in the market as it is structured today benefit from more credits,” said Haya.
And that means too many credits are issued and most fail to make the promised reductions.
Price collapse
In the face of this criticism, the price of carbon credits for nature conservation projects collapsed — from 18 dollars per tonne in January 2022 to six dollars in January 2023, then less than two dollars by mid-October.
After a peak of more than 350 million credits issued in 2021, numbers decreased slightly in 2022 and 2023.
But they remain well above pre-2020 counts, and according to Bloomberg, credits could reach eight billion by 2050.
Nor are corporations alone in relying on them for carbon neutrality.
Article Six of the landmark Paris Agreement allows countries to cooperate on hitting emissions-reduction targets, including by transferring carbon credits.
It could thus allow states to substantially invest in the carbon credit market, while developing countries could count on the credits for crucial climate funding.
Oil-producing countries meanwhile see them as a cheap solution to reaching “net zero” status.
Saudi Arabia has already announced a national offset scheme for corporations that are Article Six-aligned.
‘Large-scale’ greenwashing
According to multiple outlets, Liberia is in the process of an agreement that would grant 10 percent of its territory to forest protection in exchange for carbon credits for an Emirati company chaired by a member of Dubai’s ruling family.
This kind of agreement could lead to “large-scale greenwashing operations”, said Alain Karsenty from the French Agricultural Research Centre for International Development.
Greenwashing is when companies — or countries — use deceptive claims to convince the public that their products or operations are environmentally friendly.
Researchers and campaign groups are pushing for the end of offsetting. Instead, they want a “contribution” approach in which companies and governments would finance projects necessary for reducing emissions. They would not be allowed to use carbon credits for dubious claims of carbon neutrality.
Haya argues that independent experts need to be involved without “an interest in the outcome”. There also needs to be more data transparency, she said.
“I do worry that the UN system is the opposite of what we need in order to carry this out,” she added.