Finding Common Ground in the Debate Around Voluntary Carbon Markets

News 19.03.22

Posted by James Lloyd, Lead, Nature4Climate

When it comes to voluntary carbon markets, stark media headlines are common. While these attract attention and drive clicks, they often over-simplify a topic that is complex and nuanced, yet critical to the global effort to combat climate change.

The problem? Such framing suggests deep polarization within the climate and environmental communities. A recent Guardian piece, for example, follows a common narrative among critics of voluntary carbon markets. However, when we look at the piece, point by point, we see there are actually many areas of agreement, not debate, between the ‘pro’ and ‘anti’ sides of the environmental community. While there are certainly areas where more trust needs to be built, there is actually a significant amount of common ground on which we can and should come together.

1. Nature-based solutions should always accompany decarbonization

The first is a big one. There is total agreement that nature-based solutions, broadly, and forest carbon markets, specifically, are not a substitute for rapid decarbonization. Using them to delay necessary action on this front is dangerous and unacceptable. This is not a case of “either/or,” but rather “both/and,” where rapid decarbonization is the must, and NbS carbon credits are the supplement.

It is important to note that nature-based solutions (NbS) are not limited to forest carbon markets, although the two are often conflated. NbS represent a wide range of actions to protect, restore and manage natural ecosystems to mitigate and adapt to climate impacts, deliver a range of other benefits, and ultimately transform our relationship with nature in ways that help people, the environment and the climate. NbS financed through voluntary carbon markets are a piece of the bigger picture.

2. Planting trees cannot balance out business-as-usual fossil fuel emissions

Second, we agree there is simply not enough land for protection or restoration to offset business-as-usual or low ambition approaches to climate action. A notable example of this is an estimate that Shell’s net-zero plan would require reforesting an area the size of Italy. That is clearly untenable. Rather, we need to understand the role that NbS carbon credits can play in the path to global net-zero (more on this below). And we also need to think about corporate investment in NbS credits in terms of the global outcomes that we’re trying to achieve (ending tropical deforestation, protecting biodiversity, supporting natural regeneration, etc.), rather than siloed transactions that only help a company achieve its individual goals.

3. Hard-to-abate sectors need special consideration

We agree that hard-to-abate sectors are a special case. Oftentimes, when we’re debating companies’ use of carbon credits, what we really mean is oil and gas companies’ use of carbon credits. Let’s avoid painting with a broad brush and speak clearly. Energy-related CO2 emissions grew to 36.3 Gt in 2021, a new record high of global emissions, and until there is more clarity and guidance on what viable and robust science-based pathways look like for these companies, as well as the sort of claims they should be making, we agree that their use of NbS credits can present serious concerns.

However, it’s important to acknowledge that simply calling on oil and gas companies to completely transform their businesses overnight is not a practical solution to the challenge. We need to work together to clarify what the appropriate science-based pathways are for these sectors, and where NBS fit in.

4. Low-quality credits are not acceptable in voluntary carbon markets

We agree that a Voluntary Carbon Market (VCM) comprising large-scales of low-quality carbon credits is not an acceptable outcome. While we need scale to unlock the full potential of NbS, we must not sacrifice environmental or social integrity to achieve this. I can’t think of a single organization or colleague among N4C’s network that would disagree with this statement. Indeed, thousands of smart and dedicated people come to work every day to prevent this outcome.

5. Transparency and accountability can help a race to the top

On a related note, we agree that transparency is essential, both on the supply and demand sides, and welcome all efforts to create accountability. Calling out where things aren’t working is just as important as acknowledging where they are. We endorse these efforts, but argue that they need to be done in the spirit of creating a race to the top — of pushing for continuous improvement — rather than in an attempt to subvert a high-potential solution.

6. Strengthening the roles of Indigenous peoples and local communities

We agree that strengthening the roles and rights of Indigenous Peoples and local communities as forest guardians is imperative. Doing so is not only right, it is smart, as they are guardians of invaluable knowledge that has been proven effective in protecting vital ecosystems around the world for millennia. Efforts that do not reflect this value should not be considered nature-based solutions and certainly are not an acceptable outcome in the context of the VCM.

It is our contention, though, that when designed correctly, markets can be an effective tool for channelling support toward IPLCs, and for helping find solutions to extremely complex and challenging issues around land tenure and access.

7. Carbon credits can be used to compensate for historic and residual emissions

We agree that carbon credits should be used to remove historic carbon from the air, as well as counteracting a small residue (5–10%) of unavoidable emissions once we have decarbonised the rest of the economy. These are extremely valid uses of carbon credits and we recognize that a handful of companies are already pioneering on these fronts.

Where More Bridge-Building is Needed

High Ambition Pathway to Net-Zero

It’s clear there is a significant amount of agreement already established between the different sides of this debate; more than enough common ground for us to move forward on the basis of dialogue and trust-building as we explore some of the areas where more nuance is needed.

One such area is a legitimate and necessary role for NbS carbon credits as part of a high-ambition approach to compensate for residual emissions on the path to net-zero — in addition to historic and residual emissions.

All companies should strive to be “carbon neutral” now while moving toward the situation where only residual emissions are offset by mid-century. As part of this journey, NbS carbon credits are an effective tool for funding ecological change and for mobilizing finance from companies that are causing emissions to projects and communities on the ground.

Using voluntary carbon credits does not need to come at the expense of cutting one’s own emissions. There should be no contradiction between cutting your own emissions (in line with science-based targets) and using high-quality voluntary carbon credits to compensate for residual emissions.

Most NBS carbon credits certified to date have been ‘avoidance’ credits (i.e. they have prevented a further tonne of CO2e from entering the atmosphere from projects such as forest conservation). Ultimately, global net zero requires cutting emissions as much as possible and then balancing any remaining emissions with projects and programs that remove carbon from the atmosphere. But that’s the destination, and we’re on a journey. Using high-quality NBS credits to compensate along the way offers us a high-ambition pathway to net-zero and beyond, while also delivering a range of co-benefits for people and biodiversity.

Trust-building takes time. It means all of us need to spend more time talking to each other and less time chasing soundbites and sensational headlines. There’s already more than enough common ground to form a foundation for constructive dialogue, and for discussing the appropriate nuance, messaging and guidance around the legitimate role that NBS carbon credits can and should play in the path to net-zero. We welcome any and all who would like to join us and the many others already embarked on this timely and necessary journey.

“Trust-building takes time. It means all of us need to spend more time talking to each other and less time chasing soundbites and sensational headlines.”

James Lloyd, Lead, Nature4Climate