October 26

Analysis: Staying True to the Paris Agreement Could Hobble Booming Carbon Offset Market

By Kerstine Appunn

The booming voluntary market for CO2 emission offsets is facing a hairy double counting issue that could stop further growth in its tracks. While high-aiming businesspeople are preparing a new standard to scale the market and make it more transparent at the same time, there is growing concern that double claiming of the same emission reductions by countries where they take place and companies that finance them could harm overall climate ambition. Researchers and NGOs propose new ways of letting companies invest in energy and climate projects in the global south – without letting them use carbon credits towards their emission budgets. But others insist that only the selling and buying of actual offset credits will keep the market alive. The UN climate conference COP26 starting in Glasgow next week could bring some clarity on this – if governments can reach a decision on the infamous Article 6 of the Paris Agreement. But even with new guidance from the climate negotiators, the market will take several years to find its feet and adjust to the new rules, experts say.

Buying CO2 reductions from a project in the global south in addition to avoiding emissions from their own operations (or instead of avoiding them) is the new normal for many companies who are pursuing net-zero targets or want to sell “carbon neutral” products. The recent boom and projected growth of the carbon offset market is so considerable that some predict an undersupply of carbon credits in the near future. The potential of a “100 billion dollar” market has caught the attention of famous business people and bankers such as former governor of the Bank of England Mark Carney, who with his Taskforce on Scaling Voluntary Carbon Markets (TSVCM) wants to shape the global rules of carbon offsetting.

But while “compensating” emissions on the voluntary market becomes more and more mainstream, there is also recurrent and strong criticism of the practice, and with the emission accounting rules of the Paris Agreement taking hold across the globe, the entire market could lose its footing.

Photo by Steve Taylor.

Source: Clean Energy Wire (link opens in a new window)

Energy, Environment
climate change, global development, renewable energy