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 a corporation to compensate for its emissions. This is especially so when other economically feasible means of climate change 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.
The voluntary carbon market is 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.
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 an exchange only for credible, quality credits.
When voluntary carbon projects are ‘done right’ and credits are used responsibly, the voluntary carbon market is a critical mechanism to direct investment and 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.
CIX adopts stringent measures to ensure that the credits we sell make a genuine, positive impact. For example, the nature-based projects the exchange offers must demonstrate a strong degree of quality and integrity– delivering real and lasting environmental, social and biodiversity impact. All projects listed on CIX’s Project Marketplace are filtered through a 4-step screening process:
Step 1: Projects must meet internationally recognised carbon verification standards.
Step 2: Projects are assessed against a checklist of CIX’s Internal Scoring that includes assessment of carbon attributes, biodiversity and social impact and project risk management.
Step 3: Projects are calibrated against third party analysis and ratings. CIX uses Sylvera to assess and monitor credit-bearing forestry projects.
Step 4: Projects that fall into a ‘marginal decision’ category are reviewed by CIX’s International Advisory Council of over 20 global thought leaders who are experts in sustainability, and who represent NGOs, project developers, standard setting agencies and industry.
Note: Our assessment of each project serves as an internal guide in deciding whether to list a project on exchange. It is not an indication of the financial / investment potential of a project; and is not used to determine whether a carbon credit or project should be bought or sold.
March 2, 2022