The US has punctured the voluntary carbon market (VCM). Last week, US Treasury Secretary Janet Yellen announced a set of principles that President Joe Biden’s administration would like to see adopted by participants in VCMs – both in purchasing the credits the market trades in and in certifying the integrity of those credits.
At first glance, this is an important step. Despite – or perhaps because of – the numerous controversies surrounding VCMs in recent years, and in a move at odds with the increasingly aggressive pushback in some parts of the US economy against institutional efforts to address the causes of climate change, the government is delving into a dark subject.
There is no question that VCMs could clean up their act. For far too long, companies across industries have assuaged their own guilt by buying up meaningless credits and marketing them to their customers as a way to convince themselves that the climate impacts of their activities can be wiped away with the click of a button.
At the same time, the excellent work of investigative journalists around the world has helped spotlight the question of whether carbon credits do what they say they do.
Yellen wisely acknowledges all this. That is why she has taken pains to emphasize – as many others have already done – that the primary responsibility of economic actors is to reduce their direct carbon impact as much as possible, and not to view credits as a box-ticking exercise that rid of those emissions. need.
That requirement is a pragmatic recognition of the fact that even the most perfectly functioning carbon market would be flawed, for the simple reason that much of it will always be based on hypotheses.
Take the oft-cited example of the many cleaner cooking stove (cookstove credits) projects that claim to reduce emissions caused by traditional cooking equipment in poor countries. A paper published in January by researchers at the University of California Berkeley found that stove credits had no value at all.
US Treasury Secretary Janet Yellen
| Photo: Reuters
Clicking the carbon offset button next to your airline booking will ensure you have helped provide such a heater, but who knows if it will ever be used, how often or for how long? And even if it is used, where will it end up if the original recipient is long gone?
What about the forest you are told you have protected: was it ever at risk of being cut down? And if it’s newly planted, how long does it take before the effectiveness of its carbon absorption starts to fade? New Zealand, which has been pursuing an aggressive reforestation program of millions of trees for several years, is currently going through something of a reckoning over the impact of that initiative on society’s land-use balance – and must ask tough questions about its impact. effectiveness.
Yes, forests store a lot of carbon, which is why it is certainly best not to cut them down, but the rate at which they absorb it decreases as they age. There are only so many forests you can plant to achieve the maximum absorption rate while the trees are still young and growing quickly. Putting more and more trees in the ground is – pardon the pun – not a sustainable answer.
Man has to deal with the world as it is now. Yellen’s statement cannot solve all the problems with VCMs overnight
Of course, avoiding a hypothetical emission of one ton of carbon is not comparable to avoiding a ton of carbon that you know for certain would have been emitted. The problem is being able to judge between the two.
There is no quick and easy way to verify projects’ claims when it comes to this distinction, despite all the efforts of the carbon credit registries trying to do just that – such as Verra, The Gold Standard and the US Carbon Registry (ACR), as well as a whole range of other specialized registers and rating agencies.
Even better is removing a ton of carbon that has already been emitted. The stated goal of many carbon trading efforts is to help boost financing to projects that have just that goal in mind, through capture and storage technologies or other mitigation efforts.
Of course, much of that work still has to come. For now, people have to deal with the world as it is now. Yellen’s statement cannot solve all the problems with VCMs overnight. What it can do, however, is ensure that the challenges that undoubtedly exist with VCMs are not allowed to overshadow the entire concept, making perfection the enemy of the good.
There are plenty of campaigners who will never accept the proposal of a carbon credit market. But the purity of an approach that is unable to distinguish between different degrees of imperfection is a luxury that the rest of the world cannot afford and should not be seduced by.
“We know this market can do better,” Yellen said last week.
Getting the VCMs in order is, as many closely involved in climate finance efforts would rightly argue, crucial if the world is to achieve any of its interim targets, even if those targets are only stopgap solutions, while permanent CO2 countermeasures and adjustments are needed. have been developed.
In an op-ed published by the Milken Institute in 2022, Karen Fang, global head of sustainable finance at Bank of America, described VCMs as an “important but underutilized arrow in our quiver,” even as she emphasized the need for their practices to be improved and companies need to understand the limits of its use. She was right.
We have of course been here before. Bodies like the Integrity Council for the Voluntary Carbon Market (ICVCM) and the Voluntary Carbon Markets Integrity Initiative (VCMI) already have the laudable goal of trying to improve the methodologies and practices that underpin VCMs. The Core Carbon Principles (CCPs) of the ICVCM and the Claims Code of Practice of the VCMI were important contributions to the growing body of thought on this topic.
Now we have more principles from the US, and while they matter because of the signal they send, they are not the end game. There is clearly value in improving VCMs to the extent possible, and any efforts to increase transparency and oversight should be welcomed.
But policymakers must be alert to the danger that these and all the other principles floating around in the marketplace can be manipulated to serve the purposes of those who have little desire to do anything other than pay lip service to the cause. At some point the balance must shift towards stricter regulations.
The world will not run out of guidelines. Time will run out.