A Stop sign stands in front of the Neurath lignite power plant of German utility RWE, west of Cologne, Germany, January 16, 2020.
SEATTLE (Reuters Breakingviews) – As the urgency of the climate crisis becomes impossible to ignore, private voluntary demand for “carbon credits” has surged. Corporate carbon-neutral pledges led to record volumes of carbon credit transactions in 2019, according to Ecosystem Marketplace, and initial evidence suggests that 2020 volumes may be even greater despite the pandemic. This is a positive sign. It indicates growing seriousness about the necessity of addressing climate change and, when coupled with support for ambitious government policy, is a truly welcome development. In response, and with commendable speed, the Taskforce on Scaling Voluntary Carbon Markets (TSVCM) – launched by Mark Carney, the United Nations Special Envoy for Climate Action – recently came up with a blueprint for scaling voluntary carbon credit markets. But the draft blueprint fell short on a key question for these markets. In the context of the Paris Agreement, what can the buyers of carbon credits legitimately claim to be achieving?
CARBON OFFSETS
Voluntary carbon market demand is driven by the desire to make offsetting claims, which net out a company’s emissions. When Royal Dutch Shell offers “carbon neutral” oil to its customers in the United Kingdom, for example, the idea is that burning this oil will result in zero net emissions. These emissions will be counterbalanced by offsetting reductions, or by increases in carbon absorbed by forests or other carbon “sinks”. For this to be true, however, Shell’s purchase of carbon credits has to result in a lowering of global carbon emissions, compared to a scenario where it did not purchase them. This is a fundamental criterion for the environmental integrity of any offset claim. But under the Paris Agreement, there is no guarantee that voluntary carbon credit purchases will actually lower global emissions.
THE PARIS CONUNDRUM
Under the Paris Agreement, every country has pledged to reduce greenhouse gas emissions in the form of a “nationally determined contribution,” or NDC. Although current pledges are widely seen as insufficient to avoid dangerous climate change, they cover nearly 90% of global greenhouse gas emissions. The problem for voluntary carbon credit buyers is that the emission reductions they are funding will very likely fall within the scope of countries’ NDCs, and countries will therefore count these same reductions towards their pledges. If this “double claiming” occurs, there is no guarantee that the purchase of a carbon credit will result in lower global emissions. Instead, the country where the emission reductions occur could simply count the reductions, relax other efforts at reducing domestic emissions, and claim to have achieved its NDC. This may help the country achieve its NDC pledge, but it has not lowered global emissions, and therefore the…
Breakingviews – Guest view: Voluntary carbon markets carry risks
SEATTLE (Reuters Breakingviews) – As the urgency of the climate crisis becomes impossible to ignore, private voluntary demand for “carbon credits” has surged. Corporate carbon-neutral pledges led to record volumes of carbon credit transactions in 2019, according to Ecosystem Marketplace, and initial evidence suggests that 2020 volumes may be even greater despite the pandemic. This is a positive sign. It indicates growing seriousness about the necessity of addressing climate change and, when coupled with support for ambitious government policy, is a truly welcome development. In response, and with commendable speed, the Taskforce on Scaling Voluntary Carbon Markets (TSVCM) – launched by Mark Carney, the United Nations Special Envoy for Climate Action – recently came up with a blueprint for scaling voluntary carbon credit markets. But the draft blueprint fell short on a key question for these markets. In the context of the Paris Agreement, what can the buyers of carbon credits legitimately claim to be achieving?
CARBON OFFSETS
Voluntary carbon market demand is driven by the desire to make offsetting claims, which net out a company’s emissions. When Royal Dutch Shell offers “carbon neutral” oil to its customers in the United Kingdom, for example, the idea is that burning this oil will result in zero net emissions. These emissions will be counterbalanced by offsetting reductions, or by increases in carbon absorbed by forests or other carbon “sinks”. For this to be true, however, Shell’s purchase of carbon credits has to result in a lowering of global carbon emissions, compared to a scenario where it did not purchase them. This is a fundamental criterion for the environmental integrity of any offset claim. But under the Paris Agreement, there is no guarantee that voluntary carbon credit purchases will actually lower global emissions.
THE PARIS CONUNDRUM
Under the Paris Agreement, every country has pledged to reduce greenhouse gas emissions in the form of a “nationally determined contribution,” or NDC. Although current pledges are widely seen as insufficient to avoid dangerous climate change, they cover nearly 90% of global greenhouse gas emissions. The problem for voluntary carbon credit buyers is that the emission reductions they are funding will very likely fall within the scope of countries’ NDCs, and countries will therefore count these same reductions towards their pledges. If this “double claiming” occurs, there is no guarantee that the purchase of a carbon credit will result in lower global emissions. Instead, the country where the emission reductions occur could simply count the reductions, relax other efforts at reducing domestic emissions, and claim to have achieved its NDC. This may help the country achieve its NDC pledge, but it has not lowered global emissions, and therefore the…
Read More: Breakingviews – Guest view: Voluntary carbon markets carry risks