It’s quite a thing to find yourself, unexpectedly, in the eye of the storm. One day, I was a CEO in a niche industry — the next, I found myself at the center of a heated public debate.
My sector, the voluntary carbon market (VCM), and my former organization work with carbon credits, setting standards for their generation. Over 25 years working with carbon credits, I witnessed the evolution of perceptions about this once small but innovative climate solution grow increasingly polarized — with market stakeholders making the case that carbon finance channels critical funding to important mitigation efforts and detractors arguing that carbon markets are a distraction from real action.
So, are carbon credits good or bad?
The carbon credit debate is often oversimplified, reduced to a "yes or no" and "good or bad" dichotomy. We need a more nuanced discussion to decide the future of carbon credits.
The crucial question is: Can carbon markets facilitate the green transition in the long term? Carbon markets have the potential to fund the necessary transition to a low-carbon economy. Before discussing the way forward, let me explain how we arrived at this point.
Carbon as a commodity
Calls for a carbon price through taxes or cap-and-trade programs have often lacked political support. To fill this void, leading companies started to take action on their own — the genesis of the voluntary carbon market we know today, an entire ecosystem of standard-setting bodies, auditors, project developers and investors that enables companies to offset emissions and support climate action. The VCM has provided additional funding to critical actions on the ground and, by putting a price on carbon, albeit informally, helped companies limit emissions. Companies buying carbon credits tend to be climate leaders, reporting higher year-on-year emission reductions and greater supplier engagement. These companies are also more likely to have ambitious science-based targets and are leaders in emissions transparency and accountability.
The carbon credit debate is often oversimplified, reduced to a 'yes or no' and 'good or bad' dichotomy. We need a more nuanced discussion to decide the future of carbon credits.
The VCM is evolving. Critics have rightly pointed out flaws and areas for improvement, and several important initiatives are designed to improve integrity, including the Integrity Council for the Voluntary Carbon Market (ICVCM) and the Voluntary Carbon Markets Integrity Initiative (VCMI). There is also significant support for the VCM; last week the U.S. federal government published guidelines designed to support this nascent market.
However, the VCM could have a greater impact. Reducing or avoiding carbon emissions need not be the sole goal. What if we viewed carbon as a means to an end rather than the end itself?
Beyond accounting
Carbon crediting is built on two foundational concepts:
- Additionality, the idea that the project would not have been implemented without the extra finance provided through the sale of carbon credits; and
- Rigorous accounting for emission reductions or removals.
Both assessing additionality and measuring carbon are complex, requiring scientists, policy analysts, auditors and advanced technology, to name a few. In addition to ensuring accuracy and credibility, we need to reframe carbon markets to capture their full potential, ideally so that they become a linchpin in the transition of entire sectors of the global economy toward environmental sustainability.
Redefining carbon markets: Catalysts for a green economy
What would "better" look like? Carbon markets are already a crucial tool in our climate toolbox, but designed
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