Companies that buy carbon offsets on the voluntary market to offset their greenhouse gas emissions now have guidelines to report what they can and can’t claim on the purchased credits. The rules, published on Wednesday by the Voluntary Carbon Markets Integrity Initiative (VCMI), aim to toughen climate claims made by companies, in the face of bogus claims, abuse and illusory credits.
The group published guidelines for credit buyers after two years of development. To comply, companies must publish annual emissions, adopt science-driven targets and, significantly, demonstrate that their lobbying and advocacy work is consistent with the Paris Agreement and not an obstacle to its success.
Once they’ve taken these steps and shown they’re making progress reducing their short-term emissions, companies can buy carbon credits to clean up some of their remaining emissions. (More critical guidance on monitoring progress is expected later this year.) Credits must be of “the highest quality,” according to the VCMI. To judge quality, the guidelines are based on principles established by a similarly named sibling group that focuses on where credits come from. The Integrity Council for the Voluntary Carbon Market published its rules in March. They disappointed the experts.
“We’re filling a void because of policy failure, and that’s a collective failure around the world,” said Mark Kenber, executive director of VCMI.
The new guidance also acknowledges a persistent problem.
Double counting occurs when several buyers use the same carbon credit to reduce their emissions burden, according to Derik Broekhoff, a senior scientist at the Stockholm Environment Institute.
“Where it becomes a problem is when someone claims through their actions to have reduced emissions, and someone else makes the same claim or the same reduction in emissions,” he said. “And both entities really can’t have caused it.”
There are two types of systems where carbon credits are bought and sold. One is a compliance market, where credits are traded according to the laws or (evolving) rules of the Paris Agreement. At the 2021 UN climate talks in Glasgow, negotiators drafted a rule to address double-counting in this nascent market. Simply put, when one country sells CO2 credits to another, it can no longer count that carbon towards its own UN targets; just as if someone sells a car, they do not retain the use of the car.
The second system is the voluntary market, which reached $2 billion by 2021. That’s where companies can buy credits. It is these markets that have come under the most scrutiny, given the shady offsets being sold, the backlash in some developing countries and lawsuits against companies accused of greenwashing.
The voluntary carbon market in which companies participate is not part of the Paris Agreement or the decisions of the most recent UN climate talks. Credit Suisse compared it to the “Wild West” in 2022. Critics say that in the voluntary carbon market, a company and a country can claim responsibility, impossible, to have offset the same tons of greenhouse gases , similar to two drivers claiming the purchase. and ownership of the car itself.
These types of situations occur frequently. When it comes to companies and countries using the same credits, “There’s not a lot of clarity,” said Beatriz Granziera, senior policy advisor at The Nature Conservancy. “We have different opinions about whether this is double counting, whether this is double claiming, whether this should happen or not. There’s a big debate going on right now.”
Orsted AS, a Danish energy company, announced in May a new project that will capture CO2 generated from a wood-fired power plant outside Copenhagen and bury it under the North Sea. The company says the facility will capture about 430,000 metric tons of carbon dioxide per year. The credits will count towards the Paris goals of Denmark of the European Union, which represents its member countries. The Danish government did not respond to a request for comment.
The same press release from Orsted announcing this development also said that Microsoft Corp, which helped finance the work, will buy about 243,000 tons per year of the same CO2.
Such agreements are not unusual, according to Orsted spokesman Carsten Birkeland Kjaer. “It’s common practice,” he said.
This case was highlighted in a white paper published this week by Joseph Romm, a physicist and senior researcher at the Center for Science, Sustainability and Media at the University of Pennsylvania.
“This deal just goes to show that the whole voluntary market means nothing,” Romm said.
There are different accounting practices for domestic and corporate credits, just as there are different records for their issuances, Kjaer said. Double counting only occurs if two countries or two companies claim the same credits.
“Technically, there are two systems,” a Microsoft spokesman said: the Paris Agreement and voluntary carbon markets. “Both public sector subsidies and private sector purchases were necessary to make a project like this feasible,” which is why Microsoft will include emissions towards its 2030 carbon negative goal and Denmark can include none to its UN target.
To potentially address some of these concerns, negotiators at last year’s COP27 UN talks in Sharm el-Sheikh found a potential middle ground. They coined a new accounting unit, the “mitigation contribution,” which could replace corporate offset purchases. By making these “contributions”, a company could, in principle, show its effort to help finance emissions reductions, without counting towards CO2 targets.
The new VCMI code moves the needle on domestic and voluntary markets by requiring companies to disclose whether any of their credits are also being used by a country to meet a Paris Agreement pledge.
Voluntary carbon markets were never expected to be an equal partner with an international climate agreement. They were and still are ways, as VCMI explains in its new code, to help finance CO2 reductions around the world, test new policy approaches and encourage companies to cut emissions.
Kenber in 2007 founded an organization to improve voluntary carbon markets. At the time, he said, he expected that within a decade there would be no more such markets. This is because countries would soon eliminate the need for them with comprehensive, economy-wide policies that would make voluntary efforts redundant.
On the future of carbon credits claimed by both countries and companies, he said: “I would say the picture is just a little less murky than it was 12 months ago in terms of what’s going to happen.”
–With the help of Ben Elgin.
