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At COP28 & beyond, fair carbon markets must be part of the climate finance solution (commentary)

  • As COP28 gets underway, carbon markets and credits are under fire due to claims about corporate greenwashing and convoluted carbon accounting metrics.
  • At the same time, political will and climate finance remain in short supply, hindering progress toward reaching global climate goals.
  • A new op-ed argues that fair carbon pricing and equitable, transparent carbon markets represent part but not all of the climate finance solution: governments, NGOs, local communities and the corporate sector must work together in good faith toward reaching emission reduction targets.
  • This post is a commentary. The views expressed are those of the authors, not necessarily of Mongabay.

All eyes will be on oil-rich United Arab Emirates for the next few weeks as it plays host to the UN’s COP28 climate summit. For the 8th year in a row since the landmark Paris Climate Accord, carbon markets will again be vigorously debated. On one side of the debate are some environmentalists that would prefer to see a global regulatory approach and don’t trust companies to take action. They’ll claim that carbon offsetting schemes are “worthless,” plagued with problems and amount to little more than corporate greenwashing.

On the other side, proponents of market-based solutions to the climate crisis argue that markets are the most efficient way to drive resources to the lowest cost de-carbonization methods and technologies. And, importantly, that the private sector must play a leading role in helping countries reach global emission targets. Proponents will say that fixing carbon markets is part of the solution, because we need all the help we can from all sectors — the “everything, everywhere, all at once” approach.

Carbon markets are still in their infancy. The oldest market, the European compliance carbon market, has evolved through several hiccups over its 20-year life, including overallocation of allowances, price instability and even fraud. But it’s now credited with reducing emissions in Europe by 37% over the last 18 years. And the voluntary carbon market, with its nearly 200 scientific methodologies, multiple certification standards and decentralized structure, is even newer and has lately been criticized for not being as good as it should be.

Nurseries in the APA Triunfo do Xingu.
In 2021, U.S-based tech giant Amazon in partnership with nonprofit The Nature Conservancy (TNC) set up a carbon-offset project in Pará state. Image by Flavio Forner/ASL Brazil via Flickr (CC BY-NC 2.0).

Proper scrutiny of carbon markets is a necessary component of a just energy transition. Much recent criticism, however, is misleading because it implies that markets must be perfect (rather than very good and continuously improving).  This has contributed to a toxic environment across the climate sector and is holding up the show when it comes to mobilizing much necessary climate finance. As important as they are, UN mechanisms like the Green Climate Fund and the Loss and Damage Fund represent a drop in the bucket in terms of what’s needed to move the needle on climate. We desperately need to drive trillions of dollars of private finance into fixing the climate—it’s too important to leave it to government grants and regulation.

It’s hard to counter negative coverage of carbon markets that’s rooted in an anti-corporate or anti-market philosophy. It’s like arguing about religion. A recent Guardian article claimed that 94 % of REDD+ credits (a carbon project that rewards forest owners for conserving, instead of cutting, their forests) do not represent genuine carbon emission reductions. The article is based on a study that evaluated the strength (or weakness) of each project’s baseline, or in other words, how much deforestation would have taken place if the project never existed.

Despite even the most rigorous and conservative methods, that calculus at the beginning of a project is difficult enough. There is little doubt that predictions about the future will always be at least a little bit wrong!  But to suggest that most forest projects don’t prevent deforestation based on that ex post facto backward look is disingenuous at best, and exposes more of an ideological bias rather than real science. The science is clear that projects do, in fact, prevent deforestation.

This anti-market philosophy is contributing to a crisis of confidence in global carbon markets — undermining corporate participation in efforts to compensate for unavoidable carbon footprints, mitigate climate change, and scale up desperately needed investment in forest conservation, especially in the tropics.

Natural climate solutions can deliver significant CO2 abatement. Worldwide, plants and soils store more than 2,100 metric gigatons (Gt) of carbon, roughly twice the amount contained in all currently known oil, gas, and coal reserves. According to Conservation International’s Exponential Roadmap for Natural Climate Solutions, “the land sector — forestry, farming, grazing, even parks and protected areas — is responsible for an astounding 12.5 Gt, or 25 percent, of global greenhouse gas emissions.”

COP 28 must address the dual crisis of political leadership and climate funding, and send a signal to the world of private finance, corporations and markets that they are desperately needed now.  We acknowledge that the history of the COP process is not encouraging—it would be very difficult to show any bend in the emissions curve resulting from the previous 27 COPs. However, it is still the only semblance of global climate governance we have, so we must endeavor to fix, not abandon, it.

That’s where carbon markets — voluntary and compliance — and carbon taxes must come in to control those costs that the atmosphere has borne on our behalf for the last 150 years of our burning fossil fuels. Price will change our behavior: we will buy electric cars when the cost of burning gas in them gets too high, we will buy energy efficient houses when the cost of heating and cooling them is reasonable, we will take fewer expensive fossil-fueled flights when electric planes are invented, and we will eschew products that rely on deforestation only when the cost of carbon increases their price over alternatives.

Clouds reflected in a lake in the Amazon Rainforest.
Clouds reflected in a lake in the Amazon Rainforest. Image by Rhett A. Butler/Mongabay.

So, here’s our recipe for four actions we’d like to see from COP 28 to signal to the world that the time is now to take real action, not just make more pledges.

  1. Simplify the rules for carbon accounting.

The Paris Agreement enshrined the role of markets and the private sector in the climate change fight. Trading in carbon credits could reduce the cost of implementing countries’ decarbonization plans by more than half –as much as $250 billion in 2030. But it’s been 8 years and the basic accounting rules required under Article 6 of the agreement are still up in the air. Accounting for the transfers of credits in the accounting ledger for the hard, and expensive, work of decarbonization by companies, countries and indigenous people is fundamental market architecture—like the oxcart that farmers used to bring their produce to market. We desperately need to bolt the atmospheric chemistry of carbon onto the global financial system. The work of governments and philanthropy will not get the job done alone.

  1. Recognize and improve existing standards.

The COP should endorse the independent regulatory bodies that have sprung up to bring a minimum quality standard to the carbon markets. The standards are always in the process of improving their oversight of methodologies, and the Integrity Council for the Voluntary Carbon Markets (ICVCM) has put in place a framework that will guarantee a high bar for quality. Incorporate those efforts by reference and endorsement, but for god’s sake, don’t get into the middle of it—the lessons from the UN’s Clean Development Mechanism clearly point in the direction of a well-regulated, but not managed, market.

  1.  Set a fair minimum price for carbon.

As we pointed out above, carbon pricing signals and the internalization of carbon emission costs are the most effective ways to drive the kind of transition we need, in the limited time we have. Carbon credits in the voluntary market can now be bought for less than a $1 a ton, yet the cost to do a carbon project is virtually never less than 5$ a ton if it’s truly additive to business as usual. Credits are selling this cheaply now because demand is low and the project owners are desperate to pay salaries to keep their rangers patrolling and cookstove maintenance crews out servicing stoves. A minimum price guarantees that companies will be more motivated to take action within their own control to bring down their emissions, and it allows for work on the ground to move forward and get financed with more certainty. Very few banks will finance projects in emerging markets where risk is high, especially when the return, and market pricing, is so uncertain. Yet these countries are the places in the world that most need finance to stop deforestation, capture methane and install cleaner energy.

  1. Encourage companies to be part of the climate solution.

The VCMI, Voluntary Carbon Market Integrity initiative is creating a safe place for companies to engage with carbon markets. This is necessary because companies have been criticized, and even sued, just for engaging in the carbon market. As a result, companies that pledge to be carbon neutral risk being maligned for what is clearly the right thing to do: finance carbon projects. Send a signal to companies that the world’s governments want companies to get back into the market without fear of being “green-smeared.”

The time to act is now, the world is watching.

John Edward Myers is a writer and award-winning film producer who previously held leadership positions at The Nature Conservancy, National Audubon Society, Conservation International and WWF.
Charles Bedford is founder and Chief Impact Officer of Carbon Growth Partners, a professor of climate finance at the Hong Kong University of Science and Technology, and previously served as the Regional Managing Director for The Nature Conservancys Asia Pacific Region.    

 Related audio from Mongabay’s podcast: A discussion of how the landmark U.N. Loss and Damage Fund for developing nations hit hardest by climate change has become watered down and voluntary, listen here:

Related resources: Find Mongabay’s global directory of reforestation and tree-planting projects, a starting point for people wanting to support reforestation projects, here, and see related coverage of reforestation efforts here:

New Tree Tech: Cutting-edge drones give reforestation a helping hand


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