The world is vastly off track for meeting essential climate goals, and in a worrying and unexpected plot twist, climate advocates are now careening toward a terrible mistake that could set back climate action by decades.
To win on climate, humanity must mobilize trillions of dollars in private green investment, particularly in emerging economies where greenhouse gas emissions are skyrocketing. Unfortunately, despite the urgency of the problem, some of the very groups seeking to accelerate climate action are poised to choke off one of the largest sources of climate finance for the developing world: the global voluntary carbon market (VCM).
The private sector is ready to do its part to finance climate action in the developing world. Over the past few years, thousands of global companies have voluntarily committed to achieve net-zero emissions by mid-century. Many companies are taking steps to meet their targets and are prepared to invest far more.
Of course companies should deliver steep emission reductions in their own operations and supply chains, but to further raise money for climate action in developing nations, companies should also be allowed to count credits toward a portion of their net-zero targets. Currently, these credits cannot be counted toward the targets, including in the newly signed bill in California requiring the emissions reporting of companies operating in the state.
African leaders meeting at a regional climate summit last month called on the international community to do more to promote carbon investments in their nations. They understand that most carbon credits are produced in developing nations and that scaling-up carbon finance in those countries would create jobs and support local communities in addition to fighting climate change.
Unfortunately, several influential climate groups appear determined to force companies to exclude such credits from their net zero accounting. Earlier this summer, one leading climate advocacy group, the Science Based Targets Initiative (SBTi), has said that VCM credits should not count toward a company’s compliance with its corporate climate goals. Another initiative, the Voluntary Carbon Markets Integrity Initiative (VCMI), has left the door open but has pulled back from a proposal it published last year that would have given companies some ability to count VCM credits.
SBTi appears to believe that companies should and will invest in the VCM at scale simply because those companies will be able to show they are contributing to global climate action, even if such contributions do not apply to their own net-zero targets. That is naïve. Appeals for corporate philanthropy will not mobilize the trillions needed for developing nations to decarbonize.
Some fear that allowing companies to use VCM credits would make corporations complacent and slow progress. But this isn’t the case. Recent studies show that companies that make VCM investments are, on average, doing more to reduce their emissions than those that do not. In part, this is because by purchasing carbon credits, these companies are voluntarily putting a price on their emissions, resulting in an annual expenditure that they try to reduce over time.
Yes, we need to guard against low quality credits in the market. But where high-quality and effective VCM projects exist — and more and more of these are available every day — projects should be available to companies that are transitioning to net-zero emissions.
Why? Even voluntary net-zero commitments require companies to create greenhouse gas
inventories, set targets, decarbonize their operations and comply with stringent audit and disclosure requirements. In some cases, these companies need access to credits to help meet their targets because internal decarbonization plans have fallen short for any number of legitimate reasons (from permitting delays to technological bottlenecks). These are the first movers, and they should be applauded, not punished.
In guarding so doggedly against misleading corporate claims, known as greenwashing, climate advocates are missing the big picture. Climate advocates must support, not denigrate, companies that are voluntarily taking on ambitious decarbonization goals and willing to make big investments in climate solutions, especially for emerging economies.
If we fail to fix this problem, then will have eliminated one of the most promising tools we have today to mobilize the trillions needed to solve the climate crisis.
Dr. Jennifer Jenkins is chief science officer at carbon-credit platform Rubicon Carbon. Rubicon’s initial product, the Rubicon Carbon Tonne, or RCT, provides enterprise customers access to proprietary nature-based and non-nature-based carbon credits.