Abstract
Climate change is a significant issue because it has the potential to cause widespread environmental, social, and economic impacts. CO2 emissions are a leading driver of climate change, causing heat to be trapped inside the earth's atmosphere and increasing global temperatures. To mitigate the effects of climate change carbon offsets have been established which are then bought in carbon markets in the form of carbon credits sold by project developers or intermediaries. In the past, carbon markets have failed because the offset investments were not additional to pre-existing measures being taken, resulting in more harm than good. Rebuilding carbon markets in a responsible and transparent way with a set of required core principles will deliver robust, quantifiable, and climate-positive outcomes. The most effective method to accelerate climate change mitigation and reach our Paris Agreement goals to reduce greenhouse gasses (GHG) by 50% in 2030 is to implement a new carbon market design.
Introduction
A key movement for the development of net zero was the 2015 Paris Agreement. The overall agreement of this landmark treaty was that global warming should be limited to no more than 1.5 degrees Celsius to reduce the risks of devastating impacts. Many scientists were very skeptical that this was possible, given the absence of radical proposals.Scientists soon realized it was impossible to get their models to decarbonize as fast as 1.5 required with continuous economic growth. The only way to make the models work was by introducing carbon removal, where any concerns with this are brushed away with the sheer enthusiasm that surrounds these technologies.
We believe large-scale carbon removal will work because it must work, but even emerging at scale, they are very expensive to run. Some studies estimate many trillions of US dollars with no evident economic benefit because the carbon is just hidden underground.
Carbon markets are not uniformly delivering what they promise, and many believe they may be making things worse. However, they are a mechanism to provide investment in vital natural solutions. If done differently, carbon markets can bring significant money to people and places that need it. By providing strong incentives for companies and organizations to neutralize and reduce total emissions with carbon markets, we can reach the 2030 Paris Agreement goal of eliminating GHG emissions by 50%.
Current Carbon Markets
We can avoid a climate catastrophe, but we cannot until we confront our wishful thinking about net zero to ensure local communities benefit from this growing industry. A ton of carbon is not just a ton of carbon, it embodies natural protection, community interests, and benefits as well as helping save us from disastrous climate change. We designed carbon markets with various assumptions: carbon markets perpetuate the notion that our forests and peatlands are all about carbon, overlooking the ecosystem services they provide, such as clean water, nutritious food, and biodiversity and its related services such as pollination.
Companies are prepared to pay for carbon because it helps them to tick either a compliance box or the public relations boxes. Carbon markets imply we can continue with our fossil fuel-driven lifestyles and offset our externalities, perhaps even our guilt, on poor local communities. The complicated and costly reporting and verification systems end up taking up most of the revenue that is then coming from carbon, and local communities get the leftovers – if they are lucky. The value and price of carbon, compared to alternative land uses such as mining and fossil fuel extraction, has been far too low for far too long. What we’re witnessing is governments continuing to issue permits for mining and oil exploration in some of the most critical ecosystems in the global south. We have many nature-based conservation organizations protecting and restoring our ecosystems, and they are wondering how they can be a part of this carbon market. Their ability to monetize carbon that they sequester is crucial for their long-term survival and the impact we all want.
Redesigning the Market
Now that we have seen what existing carbon markets miss on the ground and what is not working, we must reshape the system to generate the positive outcomes we want. The carbon market can be used as a powerful tool to solve the climate crisis, but we have been thinking about it the wrong way. Important climate outcomes that the carbon market could help to achieve are reducing fossil emissions promptly, protecting natural carbon sinks, and removing CO2 from the atmosphere. In most people's minds, these outcomes are combined as one generic offset, but they must be separated because these outcomes need different incentives. Carbon credits can help by creating clean infrastructure in places where it would not have happened otherwise.
Companies Must Change
According to an NPR study, a handful of companies have pledged more removals than the entire world can provide (The Associated Press). At a global level, the IPCC has made abundantly clear, removing CO2 from the atmosphere will be essential for limiting global warming. Companies need to change the narrative from “we are no longer a part of the problem if we neutralized our emissions” to “we are part of a global solution to climate change.” They must not just imitate what needs to happen globally but take actions that beneficially advance a global net-zero outcome, including prioritizing emission reductions over removals urgently. Secondly, companies should focus on making equitable contributions to global goals including near-term support for emission reductions outside their value chains. Third, companies should connect with larger policy efforts. No company acting on its own can solve the climate crisis, and we urgently need to focus attention on collective action. Companies that are truly focused on net zero need to support climate policies at all levels of government and internationally that advance an equitable, comprehensive, and coordinated global transition.
Core Carbon Principles
We need a set of required core principles to build a market that delivers robust, quantifiable, and climate-positive outcomes (Core Carbon Principles). The voluntary carbon market is driven by private sector actors, and it is not regulated by governments or financial authorities. Unregulated does not mean chaotic or opaque. To design an effective market we need integrity. Markets are always looking for a new product to sell, and today that product is carbon. Companies will be incentivized to buy carbon credits because they present a way to make more profit by reducing their carbon emissions and then selling and trading them. Without governmental and political drivers, the carbon market can work to serve its true purpose.
Five core carbon principles will address the most critical elements of credit quality. First, additionality, the emission reduction would not have happened without the revenue from carbon credits. Next, permanence, reductions and removals will stand the test of time, and if they do not then they will be fully compensated. An example of permanence is a forest project that issues carbon credits that is then destroyed in a wildfire, in this case, the forest project will be fully compensated for. Third, robust quantification, the impact of the credits is accurately measured and accounted for based on science. Fourth is validation and verification, the numbers are genuine and meaningful and validated and verified by an accredited body that has the integrity to do that job robustly. Finally, no double counting, a carbon credit is registered and issued only once and the emissions reductions and removals that the credit generates will only be claimed by one party. With the implementation of these core carbon principles into the carbon market, we can transition to net zero emissions with sustainable development impacts and safeguards
Accelerating to 2030 and Beyond
The establishment and maintenance of effective carbon markets are crucial in our global effort to combat climate change and accelerate toward reaching our 2030 Paris Agreement goals. By incentivizing emission reductions and a set of core carbon principles, carbon markets offer a viable solution to address the challenges posed by carbon emissions. However, for these markets to be truly effective, they must be designed and implemented with careful consideration of transparency, integrity, and inclusivity. Furthermore, international cooperation and coordination are essential to ensure the harmonization and compatibility of carbon markets across borders. It is only through integrity and robust markets that we can achieve meaningful progress in reducing emissions, protecting our environment, and securing a livable planet for future generations.
Works Cited
“As Multiple Crises Threaten Sustainable Development Goals, Sharing Science, Technology Key for Global Progress, Speakers Say as Economic and Social Council Forum Opens | UN Press.” United Nations, 3 May 2023, press.un.org/en/2023/ecosoc7125.doc.htm. Accessed 15 May 2023
“Championing and Accelerating Solutions to the Climate Crisis.” TED Countdown, countdown.ted.com/. Accessed 16 May 2023.
“Core Carbon Principles.” ICVCM, 3 May 2023, icvcm.org/the-core-carbon-principles/. Accessed 15 May 2023
Peters, Glen P, et al. “Measuring a Fair and Ambitious Climate Agreement Using Cumulative Emissions.” Environmental Research Letters, 11 Sept. 2015, iopscience.iop.org/article/10.1088/1748-9326/10/10/105004. Accessed 15 May 2023
The Associated Press. “Corporate Climate Pledges Are Weaker than They Seem, a New Study Reports.” NPR, 8 Feb. 2022, www.npr.org/2022/02/07/1079009751/corporate-climate-pledges-are-weaker-than-they-seem-a-new-study-reports. Accessed 15 May 2023
“United Nations Carbon Offset Platform.” UNFCCC.Int, unfccc.int/climate-action/united-nations-carbon-offset-platform. Accessed 15 May 2023.
“What Are Carbon Markets and Why Are They Important?” UNDP Climate Promise, 30 June 2022, climatepromise.undp.org/news-and-stories/what-are-carbon-markets-and-why-are-they-important. Accessed 15 May 2023
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