Rebuilding Trust in Carbon Offsets Faces Uphill Battle
- Media Manager
- Jul 11, 2023
- 2 min read
The Wall Street Journal
Written By: Dieter Holger
Published: July 12th, 2023
The $2 billion voluntary carbon-offsets market has suffered allegations that many credits don’t deliver the emissions cuts they promise, but multiple efforts to rebuild credibility face an uphill battle.
Recently the Commodity Futures Trading Commission said it would make policing carbon offsets a priority, Nestlé decided to leave the market and standard setters published guidelines that few existing buyers would meet. As things currently stand, only 5% of companies buying voluntary credits would meet the tough new standards on their proper use, according to Trove Research. It also estimates that less than 2% of projects issuing credits would comply with new standards for sellers—assuming the final rules coming soon are in line with the draft published in July 2022.
“The offset industry’s inability to self regulate has produced a slow-moving crisis,” said Danny Cullenward, research fellow at the Institute for Carbon Removal Law and Policy at American University. “Companies are asking whether the marketing benefits are worth the legal risks.”
Carbon offsets are part of nearly every scenario that keeps global warming to 1.5 degrees Celsius. Initially popular with companies, they were seen by many, including U.S. climate envoy John Kerry, as a crucial way to fund climate action around the globe. Morgan Stanley estimated in February that it could be a $100 billion market by 2030.
However, over the past year the market’s credibility has suffered after a series of allegations that credits aren’t delivering on their emissions-reduction promises. It has left many companies with cold feet.
Each carbon credit is supposed to equal one metric ton of carbon dioxide avoided or removed from the atmosphere. Removal credits usually fund restoration projects such as tree planting, while the most common offset or avoidance credits fund energy-efficiency projects, renewable energy or protect forests. These so-called voluntary credits are separate and usually cheaper than government-regulated carbon trading that polluters pay for in the European Union and elsewhere. There are also some voluntary credits for mechanically removing CO2 directly from the air, which are currently much more expensive.
