Recently, forestry-based carbon credits, and by proxy the voluntary carbon market, has come under intense scrutiny for greenwashing.
The first part of this year was dominated by headlines around carbon credit providers being vilified for “phantom credits”, fake projects burned down by wildfires months before the credits being issued, or other well-intentioned projects that infringe on indigenous rights.
Many of these claims are at least partly true, and it’s been well known in sustainability circles that the voluntary carbon market is flawed. And yet carbon removal is an important part of any net-zero strategy. In a world where a less than 1.5⁰C degree warming by the turn of the century is seemingly becoming further and further out of our reach, we need to consider all possibilities to help limit global temperature rising and do as investors do best: diversify!
See also: – Scaling voluntary carbon markets will be a COP28 priority
There is a growing toolkit available to those investors who wish to use offsets to reduce their carbon footprint and impact on the world. Both the demand and the supply of credits is booming, with a study by McKinsey indicating that by 2030, there could be an annual supply of 8-12 GtCO2 credits. To put this in context, in 2020, the global GHG emissions from fossil fuels and land use equated to 38 GtCO2. Whilst this data makes it clear that using offsets alone is not going to get us to our goals of net zero by 2050, it also highlights the critically important role they have in removing up to 30% of emissions.
Our existing carbon credit toolkit
The voluntary carbon credit market is hugely varied and unregulated. It is important to make a distinction between carbon-avoided credits and carbon removals, as well as whether they are sourced through nature-based projects or technological ones.
An example of a technological avoidance-based credit would include a stove top project in India avoiding the emissions of dirtier cooking methods, as clay stoves using kerosene, kindling and cow dung, which are still the norm in many emerging economies. These produce high concentrations of black carbon a gas which is not only polluting but can be deadly if consistently inhaled. In this case, the net emissions remain the same, but one party has paid to “move” their emissions around. An avoidance nature-based credit could be forest conservation, where the trees are maintaining their carbon stocks. With carbon removals, the carbon dioxide is fully removed permanently. A technological removal could include Direct Air Capture, such as our partnership with Climeworks to remove 9,000 tons of CO2. Finally, an example of a nature-based removal could be afforestation, which creates new carbon sinks.
See also: – Carbon markets: Transparency is improving but action should be priority
Valuing these solutions
An important element to consider when selecting carbon credit solutions is the co-benefits they deliver. When evaluating nature-based solutions, there is rarely a project which doesn’t have other benefits which positively influence environment or society.
Take blue carbon solutions, which in themselves are extremely broad, spanning from seagrass meadows to mangrove restoration, salt marshes and even whales. Oceans cover over 70% of the earth’s surface, and absorb about 40% of human activities, however it is not yet fully understood how we can utilise these resources, and even within the systems there are various levels of maturity for understanding how they can be used for CO2 abatement.
Wetlands, are an increasingly explored area for carbon abatement, but as studies by the IUCN show, wetlands capture carbon up to 50 times faster than their forest counterparts. In addition to the carbon reduction potential, they offer beautiful landscapes for mammals, birds and fish species to inhabit and perform vital ecosystem services from water filtration to plant pollination. They are also important blue spaces for mental health, with the NHS in the UK now exploring the benefits of “blue prescribing” for anxiety, burn out and depression.
Similarly, when it comes to oceans, overfishing, trawlers and commercial cargo ships have affected underwater biodiversity levels. Combined with rising temperatures and carbon dioxide levels the ocean is experiencing acidification. Naturally occurring seagrasses offer a multi-pronged solution to these problems, storing carbon permanently, whilst also being nurseries for young fish, and filtering water. Seaweed farming is now also increasingly being seen as a solution for rising ocean pH levels, offering a way to neutralise the harmful effects of ocean acidification.
See also: – Engaging asset managers on net zero
As we look to minimise our impacts on the planet, there is no doubt we need to lower absolute emissions and work with every part of our business and the businesses we invest in. However, it’s clear that the health of the natural world, and it’s ecosystem services, will be the key to a successful and sustainable transition trajectory.
