A Major Showdown Is Brewing Over What Counts as a Carbon Credit
- Media Manager
- Jun 3, 2023
- 2 min read
Bloomberg
Written By: Michelle Ma
Published: June 4th, 2023
The United Nations is in the process of defining global carbon markets for decades to come, and it could make or break the fledging carbon removal industry.
GENEVA – A few sentences in a note from an obscure United Nations group have ignited a firestorm in the carbon removal world. At issue is a beguilingly simple question: What counts as a carbon offset?
The document – a draft to define a new global carbon market, released in May – elevated nature-based solutions like planting trees while downplaying the role of carbon dioxide removal (CDR) using machines or other forms of technology.
Both natural and technological approaches can be effective ways to stave off the most catastrophic impact of global warming.
The demarcation might not sound like a big deal, but to the carbon removal industry, it is existential.
Another UN-backed group, the Intergovernmental Panel on Climate Change (IPCC), has warned that the world will almost certainly need to remove billions of tonnes of carbon a year from the atmosphere by mid-century to limit warming to 1.5 deg C.
The market for carbon offsets is estimated to be about US$2 billion (S$2.7 billion) today. By mid-century, BloombergNEF projects it could grow to anywhere from US$160 billion to US$624 billion annually. (In a separate analysis, BloombergNEF found that relying on carbon removal alone could cause the market to reach nearly US$1 trillion by 2037.)
If the UN declares nature-based solutions the one and true way to remove carbon from the atmosphere, it could effectively ice a growing industry out of the very market it is trying to serve, potentially imperilling the climate in the process.
Carbon removal’s sins, according to the UN note, include not contributing to sustainable development and being as yet “technologically and economically unproven”. Engineered removals also “are not suitable for implementation in developing countries and do not contribute to reducing the global mitigation costs”, the note said.
In essence, the world currently has two choices: pay a little money for nature-based solutions, or pay a premium for more durable removal. (For context, carbon removal start-up Charm Industrial charges customers starting at about US$600, or S$811, per tonne, which is the same amount Mr Bill Gates said he paid another removal company, Climeworks.) The UN is potentially putting its thumb on the scale in favour of the former.
The UN panel’s final decision will have huge consequences for the carbon removal industry, as well as the direction the world takes when it comes to pulling carbon from thin air to avoid catastrophic warming.
“The lines just start blurring so quickly,” said Mr Rubin. “Which is why I think having a criteria-based approach has the most clarity, rather than artificially saying one thing is nature and one thing is technological.”
