Delta Air Lines, JetBlue, and easyJet are among a growing number of airlines beating a retreat from the voluntary carbon market (VCM), as mounting controversies call into question the role of carbon credits in corporate decarbonization strategies. In the hard-to-abate energy sector, offsetting leader Shell has executed an unexpected U-turn from prior verbal and financial commitments. Here’s what critics are getting wrong—and right—about carbon credits.
In 2017, Article 6 ink was still drying on the Paris Agreement, and the VCM appeared poised for explosive growth. Six years later, the situation is more “explosive,” less “growth.” Besieged by controversies concentrated mostly in the first half of 2023, the VCM has cooled on slowing demand. Corporate purchases fell 9% compared to credits retired (93 nm) in the first half of 2022, according to Trove Research estimates cited in the Financial Times, driving down prices by 10% relative to last August.
In theory, lower prices should stimulate more purchases. In practice, the headwind is proving both systemic and entrenched. Fearing greenwash accusations, companies reevaluate how and where they incorporate carbon credits into their net-zero pathways. The VCM has serious flaws that require urgent attention; at the same time (and as the Financial Times also reports), market liquidity today could avert climate catastrophe tomorrow. In the interest of (2), every public and private organization within the VCM must squarely address (1).
Flying Too Close to the SunThe about-turn has been particularly pronounced in the airline industry, where one company has borne the brunt of recent controversy. The Financial Times reports that Delta Air Lines accounted for more than a tenth of all carbon credits used between 2020 and 2022, on which grounds it advertised itself as “the world’s first carbon-neutral airline.” In May, a class-action lawsuit challenged that claim and, by extension, its supporting carbon-reduction calculations.
Two of the most popular criticisms leveled at carbon credits have legs — but the reality is more nuanced than either side of the docket would suggest.