Patience is Not Always a Virtue

Ana Haurie, CEO of Respira, argues for urgency in the development of a high-integrity voluntary carbon market.

“No more debating while the world literally burns”, urged UN Special Envoy for Climate Action and Finance Mark Carney earlier this year. They were words to inspire progress – to kickstart the work needed to build a high-integrity voluntary carbon market (VCM) that can be put to use today. Instead, distracting noise and debate around guidelines have persisted.

The Science Based Targets initiative (SBTi), whose purpose is to mobilise corporate climate action, has embarked on a consultation that will not conclude until the end of next year – leaving businesses unsure what to do next and even more wary of committing to bold targets.

Mounting pressure on companies to reduce emissions has come hand-in-hand with increased scrutiny on those who go public about the action they are taking to do so. Headlines have criticised businesses for overstating green claims, while others have described credits as providing a ‘licence to pollute’. Meanwhile, many businesses have been quietly quitting or withdrawing their net zero commitments altogether, fearful of the reputational risks associated with the word ‘offset’.

However, there is currently no credible pathway to global net zero without the VCM. A high-integrity market has the potential to remove 2.6 billion tonnes of emissions by 2030, channel private capital into the climate, and – alongside other tools – help to mitigate the worst impacts of global warming. It has a vital role to play in the fight against climate change, and when used for unavoidable emissions in conjunction with internal reduction efforts, is an investment signalling both immediate action and long-term commitment to sustainable practices.

Credits – representing the estimated avoidance or removal of one tonne of carbon from the atmosphere – are difficult to measure exactly. But these measurements are improving all the time and precise claims are not the objective behind VCM investment, and market players shouldn’t pretend they are either.

Instead of stalling on the imperfection of these assets, businesses should be employing them as part of their long-term decarbonisation strategies – and they should be applauded for doing so.

The role of high integrity credits

As scientists develop the tools and technologies needed to eliminate emissions altogether, high-integrity carbon credits allow companies to take responsibility for their residual and hard-to-abate emissions.

Separate studies from Ecosystem Marketplace, Trove and Sylvera, show that companies which purchase carbon credits decarbonise almost twice as quickly as those that do not. By voluntarily attaching a price to their emissions through the purchase of credits, they create a financial incentive to reduce costs and therefore reduce emissions in the long-term.

Similarly, research from the We Mean Business Coalition found that companies investing in carbon credits outperform their peers in other forms of climate leadership and action – including being three times more likely to include Scope 3 emissions in their climate targets.

Although credits alone are not the sole solution to the climate crisis, they are vehicles to the necessary and urgent action needed now, and improving guidelines around their use will ensure they can be used as an effective tool to accelerate net zero goals.

The danger of indecision

Delays in providing clear guidance on how to use credits are not only creating uncertainty and trust issues around the market, but also hindering corporate climate action.

In July, the SBTi published the technical papers for the long-awaited revision to its Corporate Net Zero Standard, including the evidence synthesis report on carbon credits. This consultation exercise, designed to provide guidance for companies looking to contribute to net zero efforts, has proved disappointing for several reasons.

After the SBTi stated they were considering allowing the use of credits for Scope 3 emissions abatement earlier this year, corporates and market players hoped the consultation announcement would shed some much-needed light on the way forward for both businesses and the planet. The synthesis report, however, left reporters and business leaders unsatisfied.

Most disappointing and worrying is that there will be no decision on the use of credits until the end of 2025. Credits are most effective for immediate and short-term use, allowing companies to compensate for the environmental impact of doing business today. The consequence of waiting months for delayed guidelines and future technologies is simple: more greenhouse gases in the atmosphere.

With several companies – the most high profile of which was Air New Zealand – withdrawing net zero commitments in the wake of the SBTi’s indecisiveness, there’s a real danger that more businesses may give up on climate targets completely rather than invest in carbon credits to help reach ambitious sustainability goals. Businesses are already struggling to meet climate targets, with the SBTi announcing earlier this year that 239 corporations failed to deliver on their commitments.

Stepping up

In the absence of agreed frameworks, it is crucial that businesses do not stand down, but step up and do their own due diligence – both to consider which carbon projects to invest in, and to establish broader decarbonisation plans.

The first step for any company should be developing a roadmap that takes short-term as well as long-term emissions into account. There should be tangible and specific goals in place, such as halving emissions before 2030, and reaching net zero ahead of 2050.

In the near-term, the VCM can help to compensate for any residual emissions that cannot yet be cut. Setting an internal price for current emissions will create a financial incentive to reduce emissions over time, eventually leading to a decrease in the number of credits needed.

Fortunately, others are stepping up to fill the void. The US government’s ‘Voluntary Carbon Markets Joint Policy Statement and Principles’, as well as plans for a new ISO standard, mean that businesses may not have to wait for the SBTi to give the clarity they need.

Governments and policymakers are making encouraging steps to settle credibility and integrity issues within the market. Earlier this year, the Biden Administration outlined the key principles for responsible participation in carbon markets – signalling its commitment to helping businesses more confidently decarbonise with integrity – while the Voluntary Carbon Markets Integrity Initiative released regulations aimed at improving transparent reporting and governance for credit developers.

The EU has also made important headway, with its proposed Green Claims Directive that aims to provide consumers with clarity about corporate environmental claims. Looking ahead to trilogues later this year, policymakers should ensure they support companies by allowing the use of all types of carbon credits – reduction, avoidance, and removals – for compensation claims, which is vital for helping businesses meet their interim targets.

Although this work signals promising progress, businesses must begin making meaningful choices today. Patience is not a virtue when it comes to the carbon market; it is a peril to the planet, undermining genuine efforts being made by businesses, and validating the silence from the 81% of the world’s largest companies taking no action on their emissions. The time to reduce emissions and invest in the VCM is now.

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