Carbon credits have emerged as a pivotal tool in the fight against climate change, offering a mechanism for companies and individuals to offset their carbon emissions. The idea took initial root in the 1980s, flourishing in the following decade. The atmosphere does not see jurisdictional boundaries and does not care where emission reductions occur. The truth about carbon credits is not so simple, says Barbara Haya, director of the Berkeley Carbon Trading Project. You can purchase these credits, trade them, and bundle them together—all in very convoluted manners. This natural process presents incredible opportunities and some notable challenges in our collective fight against climate change.
The effectiveness and transparency of carbon credits have long been under fire. Some projects, as noted by Kaya Axelsson, head of policy and partnerships at Oxford Net Zero, sell four or five credits for every one ton of carbon. By doing so, this duplicitous practice highlights how misleading these credits can be in claiming major emission reductions. Additionally, once land projects are established, they can be threatened by wildfires, disease, or even illegal harvest that can render the work ineffective. As experts such as Stephen Lezak point out, this is a dire time for additionality. This requires verifying that carbon projects are actually reducing emissions and in tandem, reducing overall carbon demand.
A different company was contracted to market the credits, generating attention and offset cash flow for the nascent Zimbabwe project. Originally, their estimates predicted a pull down of 50 million tons of CO2 from the air. By increasing supply, excess credits depress the price of non-garnered credits—those which have been legitimately earned. A 2020 study in the Proceedings of the National Academy of Sciences explains this phenomenon. Meanwhile, deforestation in Brazil's Cerrado rose by an estimated 13 percent following the adoption of the Amazon Soy Moratorium, underscoring the challenges in ensuring carbon projects' effectiveness.
The Complex Dynamics of Carbon Credit Trading
Carbon credits operate under an emerging cap-and-trade market. In fact, they can change hands numerous times before their final retirement or cashing in. This complex process sometimes becomes a veil of secrecy. Barbara Haya explained:
“You know what credits have been issued, and then the next thing you know is who’s retired them, but you don’t know how many times the credits were bought and sold, and by whom.”
Such lack of clarity further complicates attempts to track the real world impact of carbon credits on emission reductions.
These complexities are further compounded by the potential for "leakage," a phenomenon described by Stephen Lezak:
“Leakage happens when supply is restricted, but demand is unchanged.”
This has the implication that when one area reduces emissions, another place has to increase them if overall demand is not reduced. Cumulatively the effect might be negated.
Ensuring Integrity and Transparency
The success of carbon credit projects depend on strong auditing practices to prove their integrity. Once a project goes into implementation, the developer brings on a third-party verifier. This third-party auditor, accredited by an independent certification body, provides the final sign-off on the project. Worries over independence still remain. Libby Blanchard remarked:
“If there’s some way to make the auditing process more independent and less tied to the outcome that the auditor provides, we would have a much better and transparent market.”
This highlights the imperative for a major rethink of the function of auditing to restore market transparency and credibility.
Additionality is and should be a fundamental pillar of any credible, rigorous carbon credit projects. Lezak argues that while projects should be additional, they should lower demand. Serious hurdles remain to making sure that projects deliver real emission reductions.
Buffer pools are designed to shield nature-based carbon storage projects from outside threats such as wildfires or invasive disease. They still don’t offer enough protections. A 2022 study in Frontiers in Forests and Global Change demonstrated that these pools might be too small to offer adequate protection.
Challenges in Measuring Carbon Storage
The permanence of carbon storage has been a source of contention. Today’s regulations would consider 100 years of storage plenty. According to many experts, this timeline is not enough. Greenhouse gases can have an atmospheric lifetime measured in millennia.
Moreover, only about 4 percent of carbon credits in the voluntary market stem from pure removals projects, according to data from the Berkeley Carbon Trading Project’s Voluntary Registry Offsets Database. This is a major red flag, because it shows an overuse of emissions offsets instead of actual removals.
Mandatory revenue sharing from every carbon project helps support neighboring local communities. Ayrey adds that on some projects, a portion of revenue generated goes back to residents who live near forests. This is hardly the norm, and project practices differ greatly.
Leave a Reply