In Short : Carbon credits can indeed play a crucial role in addressing climate change and reducing carbon emissions. While skepticism is understandable, it’s important to note that carbon credits are a widely recognized mechanism to encourage businesses, organizations, and individuals to reduce their carbon footprint.
In Detail : Policy implementation isn’t a linear path; it’s often a messy process requiring constant refinement. This is especially evident in the complex world of carbon credits, a key focus at the upcoming COP28 next month. In addressing its critics, new ‘integrity standards’ aim to enhance existing carbon markets, directing transformative climate finance directly to communities on the frontlines of the climate crisis.
Critics abound regarding carbon credits and their role in facilitating ‘offsets.’ In a nutshell, projects that either reduce emissions or extract carbon from the atmosphere issue carbon credits to represent the value of those activities. Each credit signifies a ton of carbon either in reduced emissions or those removed. Traditionally, companies or countries purchased these credits to fund emission reductions elsewhere, compensating in turn for their own emissions. In the U.S., credits are bought and sold on the so-called Voluntary Carbon Market (VCM). This practice, often involving nature programs or other emissions reduction initiatives (i.e., replacing open-fire cooking with energy-efficient cookstoves), allowed companies to claim they were ‘carbon neutral.’
However, this approach faces several challenges. Firstly, there is a practical question of whether it works, sparking numerous debates. Some studies show efficacy, while others argue that, in many cases, the activities underlying the carbon credit’s value are dubious or faulty and, in some cases, lead to higher emissions. Criticisms also target carbon credit certifiers and the level of due diligence they apply. Finally, some climate diplomats, primarily those in the EU, advocate for a more stringent criterion: carbon credits should only be issued for activities resulting in genuine and ‘permanent’ carbon removal. The term ‘permanent’ is a subject of much debate in climate circles. This perspective emphasizes a shift from activities that merely avoid or reduce emissions. While some of these complaints are fair due to the tactics of several bad actors (so-called “carbon cowboys”), others dismiss the broader – and very real – benefits of the work such credits help facilitate funding beyond carbon.
One example of everyday activities funded by carbon credits is nature-based solutions. These initiatives are crucial in mitigating deforestation, which accounts for up to 20% of global greenhouse gas emissions. Although such activities do not “remove” carbon per se, they are critical in keeping carbon-locked in mature forests. Given trees take many years to grow to maturity, we should not underestimate the value of protecting what we already have.