Exploring the Voluntary Carbon Market

As the world’s net-zero deadlines rapidly advance, it is now more important than ever for corporates to make good on their promises of decarbonising their operations. In the UK, one of the most vital organisations holding businesses accountable for their emissions is the Livery Climate Action Group , whom we are actively involved with to advance a net-zero strategy.?

As a part of adhering to net-zero targets, many businesses are getting into the market of offsetting their emissions through the use of carbon credits. Today, we’ll break down just what this looks like, how it works, and how it is impacting the race to net-zero.

The Voluntary Carbon Market (VCM) is an initiative that allows organisations to claim carbon emissions offset by varying projects in their own sustainability strategies. Companies can purchase carbon credits, each one the equivalent of one tonne of CO2 reduced, avoided, or removed from the atmosphere. Some credits are more valuable than others, with removal credits being ranked higher than avoidance credits, for example.?

In just over a decade, the carbon credit market has boomed. 1.66 billion credits have been issued, and 733 million have been retired - a.k.a used for projects. In 2021, the VCM was worth around $2 billion, a figure quadrupled from the year previous. Now, it is becoming increasingly normal for a large chunk of big corporations’ emissions statements to be made up of offsetting projects and activities borne from the VCM.

The cost of a carbon credit is largely dependent on what project it represents. For example, the average price of a carbon credit for a tree planting project is around $7.50, although the upper limits can exceed $20. For a solar project, the average is around $4.10, with the higher end being around $9.80. There are also projects which are no longer recognised by official verification bodies. For example, credits are no longer issued for renewable energy projects outside of less-developed countries, as renewable energy generation is now more cost effective than the use of fossil fuels.?

Plenty of companies are utilising the VCM to offset their emissions, and this includes some of the world’s most prominent corporations. Microsoft has an extensive portfolio of offsetting projects, ranging from tree replanting in underused farmland in Nicaragua, to carbon removal from demolition concrete in Switzerland. Aviation giant JetBlue utilised carbon credits to become the first airline to commit to carbon neutrality through offsetting projects such as landfill gas capture and forestry.?

Overall, as of October 2022, over 7000 companies have made climate commitments, representing 9.3 billion tonnes of Scope 1 & 2 emissions, and a massive 45.9 billion tonnes of Scope 3 emissions.

In order to work effectively, and have the desired results of real climate recovery, the VCM has to be strictly monitored. Projects need to be assessed and determined to have real environmental value before companies can claim them in their offsetting reports.

Or, at least, that’s how it should be. In reality, the VCM can be a little murky.

Unfortunately, a small number of less reputable verifiers have awarded carbon credits for projects that have little or no positive effect on the climate, yet companies can still claim these phoney projects as legitimate offset emissions. This has regretfully led to incidents like JP Morgan purchasing over 90,000 carbon credits to protect 2000 acres of a forest that was never in danger to begin with.?

Companies using the VCM need to be kept on a very tight leash, or the whole operation could devolve into not much more than glorified greenwashing. For this reason, regulations surrounding the VCM are getting stricter, particularly as the deadlines for net-zero targets rapidly advance. For those using the market responsibly, constant monitoring of projects is carried out to ensure that visible progress is actually being made. One of these methods is satellite imagery, which is particularly helpful in cases of reforestation projects.

Like any large-scale initiative, the VCM has its good and not-so-good aspects. Yes, it can be taken advantage of by companies who simply want to appear as if they are making a difference without doing any of the heavy lifting. But, when used responsibly, the VCM is a brilliant tool to spur businesses into funding environmental and sustainable projects across the globe. It’s time for the corporates of the world to finally start reversing the negative effect they have on our climate - time is ticking, let’s not waste it.?