“A million ways to die in the West” was a mediocre comedy at best. But adapting the title slightly, it aptly reflects the current carbon offsetting landscape: abundant options but laced with mediocrity.
Critics have mused in recent times that carbon offsets, as a commodity, are increasingly heading in the wrong direction. Big shifts in how carbon offset trading is conducted, transferring from the regulated markets, under the EU Emissions Trading System (ETS), to the Voluntary Carbon Market (VCM), has manifested some worrying trends:
The VCM, being self-regulated, perpetuates issues such as double counting and lack of verification and transparency.
Cheapening carbon offset prices disengage companies from their true purpose.
For context, the VCM has grown 58% in the last year, reaching a market value of $1bn in 2021. This can predominantly be attributed to companies wanting to cheaply achieve their emission targets, through carbon credits. Subsequently, commentators have gone so far as to describe the VCM as the “Wild West”. If former Bank of England governor Mark Carney’s predictions come true, the future value of carbon offset markets may hit $50bn by 2030. Without proper direction, this would dramatically exacerbate its current problems.
SEC commissioner, Caroline Crenshaw, has said that the VCM poses “problems with offset verification, accuracy, and quality”. To mediate this, a growing number of brokers and standards have been created, such as “Gold Standard”, to reassure the quality of the offset. Moreover, new benchmarking initiatives, such as the Integrity Council for the Voluntary Carbon Market, are attempting to provide an overarching framework for offset comparison. Even employing new technology, such as blockchains, represents a novel method for tracing carbon offsets in the market, as demonstrated by Just Carbon. These innovations represent essential solutions for the VCM, and will hopefully provide the market with the necessary stability moving forward.
COP21 in Paris helped popularise the concept of “net zero”. This paved the way for industries to start engaging with emission target setting. However, recently the media attention surrounding COP26 has prodded companies to set net zero targets, despite not having plans to achieve them, tempted in part by the low offset prices under the VCM. This sets a dangerous precedent, as companies could become predisposed to thinking cheap carbon credits will act as a shortcut to meeting their emission targets – instead of engaging with more expensive climate removal projects. This is a more difficult issue to fix internally. Externally, initiatives like the Science-Based Targets initiative and the Task Force on Climate-related Financial Disclosures (TCFD), can help companies develop comprehensive and legitimate transition plans. Essentially, this would guide how companies should navigate the offset space correctly. With the TCFD recently becoming a mandate for UK premium-listed companies, it is likely that, as the VCM grows, so will companies’ attitudes towards purchasing offsets for legitimate reasons. Should they not, companies are in danger of greenwashing – a risk that carries significant consequences.
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