24th May 2023
Author, Jennifer Strachan, Co-lead of the Chamber of Commerce’s Sustainable Business Initiative
What do you think about when you hear the words carbon credits? For some this will represent a valid and powerful way to offset or compensate for unavoidable carbon emissions as part of a transition to net zero. For others, they are seen as a way for polluters to assuage their guilty conscience whilst also potentially continuing with business as usual and making no real effort to reduce emissions.
The complex and nuanced nature of carbon credits make them worthy of further exploration to truly understand their role in helping the world to achieve its net zero goals.
The demand for carbon credits
The Kyoto Protocol of 1997 and the Paris Agreement of 2015 laid out CO2 emissions goals that led to national emissions targets and regulations to back them. This in part has meant businesses are now facing a growing pressure to reduce their carbon footprint from their customers, employees, and shareholders. Carbon credits form part of an interim solution for this and demand for them is growing.
The role of sustainability frameworks
At the Guernsey Chamber Sustainable Business Initiative, we always point companies that are interested in being more sustainable in the direction of identifying and adhering to a suitable sustainability framework, of which there are many on offer. The first steps in any sustainability framework are to measure your carbon footprint and then identify ways to reduce it. Unless these two steps have been implemented, it is hard to go any further.
Having reduced carbon emissions as far as possible, an organisation might decide to voluntarily offset or neutralise their unavoidable emissions with carbon credits. This is where their calculation comes in to play as one carbon credit equals the equivalent of one tonne of carbon emissions removed from the atmosphere.
Purchasing a suitable carbon credit
Carbon credits can be bought and sold in Voluntary Carbon Markets (VCMs). VCMs are distinct to markets where offsets are bought to comply with regulations. They offer carbon credits from a wide range of projects, including nature-based solutions such as reforestation and agroforestry or ocean-based projects, or schemes that reduce fossil fuel usage such as windfarms or cookstoves.
VCMs are growing, driven in part by demand from businesses. The total demand for voluntary carbon credits is expected to increase by a factor of at least 15 by 2030, and up to 100 by 2050, according to the private sector-led Taskforce on Scaling the Voluntary Carbon Markets.
Carbon credit purchasers are increasingly concerned about the quality of the credit and want to be sure their investment is having maximum impact. The relatively low price of many standard or mass-market carbon credits can make them seem like a bargain. However, such low pricing means limited income from selling offsets, which cannot support high-quality projects. Such projects can be expensive and complex to develop and run. They require upfront investment prior to being able to issue credits which can cause potential cash flow challenges and reporting requirements can distract front line staff whose time is best spent delivering the impact. Hence issuing credits are often only part of their financing solution.
There are various agencies that audit quality assurance and register carbon credits, including Gold Standard and Verra. A recent study of Verra accredited carbon credit providers, identified a certain proportion of credits as low quality, (though Verra and third-party rating agencies such as Sylvera dispute the results). However, Sylvera concedes that there is a range of quality credits and buyers should take time to choose high quality ones, while project providers should be pushed to deliver evidence of their high quality.
What to look out for in quality carbon credits
“Additionality” is essential for high quality carbon credits. Additionality is when the carbon finance has removed carbon from the atmosphere that would not otherwise have been removed. This protects against someone selling credits against a project that would have gone forward anyway, ensuring the impact is genuine.
Furthermore, buyers should be looking beyond just carbon. They should be looking at what positive social impact the project has, and what other benefits such as improved biodiversity or other environmental benefits the scheme provides. Businesses are increasingly understanding the link between protecting nature and solving climate issues. They should also consider the transparency of the project, where their money is going to and the impact it will have.
Despite concerns about offsetting, there are many good projects which have a positive impact and can help the transition of businesses to net zero.
Carbon credit use in Guernsey
The process has been embraced recently by business organisations such as the IoD Guernsey branch and We Are Guernsey’s Sustainable Finance Week, who have both worked hard to reduce emissions for their events. They were both supported by sponsors to offset their events’ residual carbon footprint with a range of solutions such as carbon credits and charitable donations.
One source of carbon credits that has been used locally is via the Durrell Wildlife Conservation Trust, based at Jersey Zoo, which launched its own nature-based solution in 2021. Rewild Carbon enables businesses to mitigate their carbon emissions and at the same time support the rewilding of threatened ecosystems. To ensure the carbon credits are not used for Greenwashing purposes Durrell will only work with businesses that are committed to reducing their emissions. Amy Bompas, Rewild Carbon Manager said “Our impactful programme is driven by science. It addresses the urgent need to solve both the climate and biodiversity crisis by reviving fragile ecosystems, recovering threatened species, reducing carbon and rebuilding sustainable livelihoods. We are proud to be partnering with so many responsible businesses, including many from Guernsey, all with a passion and commitment to reduce their climate impact and give back to nature.”
Trends to watch out for in carbon credits include more external scrutiny of carbon credit accreditation organisations, sovereign schemes such as Jurisdictional REDD+, an increasing demand from purchasers for better data on carbon credit quality and more transparency around projects as well as the potential for more regulation.
When used well, good quality voluntary carbon credits have a key role to play in many corporate net zero plans. Of course, the key to solving the climate crisis is to aim for net zero plans, at a personal, business and national level. This will ultimately mean there is no longer any need for carbon credits.
To learn more about how to make your business more sustainable, the Sustainable Business Initiative and Guernsey Chamber offer a range of initiatives. Get in touch!