Why quality matters for carbon credits

Voluntary use of carbon credits, as part of an overarching climate change mitigation strategy that includes direct cuts in carbon emissions, is a viable way for companies to compensate for their emissions. This is especially so when other economically feasible means of climate mitigation have been exhausted and there remain residual emissions. These emissions could either be due to currently hard-to-abate infrastructure, fuel use or process, or historical emissions that a corporate wishes to compensate for.

Far from being least-preferred and a last resort, carbon credits allow leading corporates to take immediate, much needed action in addition to – not instead of – decarbonising. Promoting and investing in carbon credit projects demonstrates a corporate’s acceptance that climate change is a global issue and its willingness to contribute to solving the problem, rather than just contributing to the problem.

Carbon markets are essential in providing a robust, market-based approach to investment in activities that mitigate climate change by reducing emissions and removing carbon from the atmosphere. Voluntary carbon credits not only fill the gap left by international and national compliance credits in effecting real change at scale, but increase the effectiveness and efficiency of mitigation efforts, leading ultimately to a positive net contribution to global climate policies.

It is important to distinguish criticism of usage of carbon credits (i.e. irresponsible use of carbon credits on their own as a displacement technique) from criticism of the instrument itself. Carbon credits are an essential tool for both limiting further emissions and for drawing down global emissions of atmospheric carbon today. They are essential because the world has not developed affordable technologies at scale to simultaneously remove all greenhouse gas emissions worldwide. Nor has a global body imposed universal regulation on carbon emissions, so carbon credits are a market force to fill the gap between emerging regulatory regimes with compliance allowance schemes.  

Not all credits are equal

However, it is fair to say that not all carbon credits are created equally. Even though one tonne of carbon is the same in any credit-bearing project, there are still quality differences.

In the case of natural climate solutions (NCS),which involve protecting and expanding natural ecosystems that absorb carbon dioxide from the environment, high quality credits will include additional benefits beyond carbon sequestration:

1. Directed income to countries of the Global South, where most nature-based voluntary carbon credits projects are located – in zones of tropical rainforest and coastal zones with fast-growing mangrove. These countries also need funds to repair or restore after natural disasters exacerbated by climate change.

2. Investment in forest preservation and reforestation projects which also support socio-economic development for those living in forest areas in line with UN-SDGs. In fact, many commercial project developers often serve both international development aid agencies and supply the voluntary carbon credit market to cover project costs, at the same time.

3. Biodiversity conservation in projects that protect existing pristine tropical forest from deforestation, illegal logging and exploration of natural resources, even in protected areas.

4. Some projects bring about climate mitigation and adaption at the same time, e.g. carbon credits from mangrove forest restoration projects are both an effective protection against rising sea levels (adaptation to potential flooding due to climate change) near cities, and are useful for carbon sequestration over a prolonged period (climate mitigation).

Challenges aimed at the voluntary carbon market include  the lack of regulation and transparency, and that it creates potential for greenwashing without actual emissions reductions. CIX addresses these valid criticisms head on, building trust as a venue for credible, quality credits.

When climate action projects are ‘done right’ and credits are used responsibly, carbon markets can be a valuable mechanism to direct funding to scale meaningful carbon sequestration solutions. CIX recognises that building trust in ‘doing it right’ requires transparency and additional due diligence or quality assurance.