Let’s face it. Even with all the board buy-in, investor interest, and political will in the world, global decarbonization is vulnerable to shortfalls in timing and technology. Put simply, certain emissions cannot be eliminated with existing solutions.
That puts companies in a tight spot. For those under mounting shareholder pressure to align with the net-zero terms of the Paris Agreement, carbon credits are integral — if not inevitable.
Coupled with risk mitigation, best-practice guidance should put buyer fears at ease. Since Bloomberg went to press, the Integrity Council for the Voluntary Carbon Market (ICVCM) published its Core Carbon Principles — the “global benchmark for high-integrity carbon credits” — to help dispel any confusion.
Here’s what buyers should look out for in their carbon credits.
1. High qualityTo keep net emissions to zero, any mitigating activity must reduce or remove from the atmosphere emissions equivalent to those it was designed to offset. The mitigative effect must therefore be:
- additional, meaning the emissions reduction wouldn’t have occurred in the absence of the credit sale. Had the project and associated reduction happened regardless of the VCM, then it cannot be used in lieu of nor be claimed to have “netted out” another emission.
- permanent or durable, meaning the project sequesters carbon for decades to centuries. Were the project to be reversed within a short timeframe, it would merely delay rather than negate the impact of your emission. (Any reversal should, at least, be compensated.)
- not overestimated, or double counted, or oversold, meaning one credit is always equivalent to one ton of emissions. Be it the fault of the project developer, broker, or buyer, one credit cannot account for more than the equivalent emissions for which it’s claimed. Otherwise, net atmospheric emissions will rise.
2. Positive impactEven if it ticks all the boxes for ‘quality’, a mitigating activity has little net benefit if it wreaks indirect damage on the environment or society it was designed to protect. At a minimum, the activity must negate:
- social or environmental harm, nor otherwise undercut sustainable development; and
- emissions leakage, meaning any emissions generated elsewhere outside its scope.
3. Good governanceCertifying direct and indirect impact is no small feat. The burden of proof cannot lie with the buyer; conversely, any absence of validation is a red flag. Carbon credits should be grounded in adequate:
- methodology, with emission reductions quantified in line with scientific data and a recognized methodology; and
- verification, which is to say, identified, recorded, and monitored by a credible third party, such as a registry.