Carbon credits are in the news, thanks to a recent segment on Last Week Tonight with John Oliver and an episode of The Journal, a podcast from The Wall Street Journal.
Oliver argues that carbon credits often falsely represent progress toward the Paris Agreement climate goals and might even make climate change worse. The Wall Street Journal is similarly critical, framing carbon credits as a way for major carbon culprits to continue emitting at unsustainable rates.
While we’re thrilled to see more attention paid to climate change, we’re disappointed in this portrayal of carbon credits — which rests on selective, outdated information about carbon credits and what role they play.
In conjunction with emission-reduction efforts in construction, carbon credits are integral to slowing climate change.
Carbon credits have evolved since they launched twenty years ago as part of the UN’s Clean Development Mechanism. Without carbon credits, it will be impossible to meet the target 1.5C-degree warming cap. In conjunction with emission-reduction efforts in construction, carbon credits are integral to slowing climate change. They deserve more credit (pun not intended) than they’re getting.
Let’s look into how carbon credits work now and clear up some persistent misinformation about them.
“Greenwashing” refers to a practice in which a company makes misleading claims about its sustainability, implying the brand is more environmentally friendly than it is. Buying carbon offsets can give greenwashing companies a simple, cheap way to “go green” without changing their carbon-emitting practices at all.
Greenwashing is a real problem. However, the idea that all carbon credits contribute to greenwashing is misleading. Verra, which runs the Verified Carbon Standard (more on this later), says that records prove that companies with a track record of using carbon offsets have achieved more advanced reduction strategies than those that don’t. Done right, companies that buy carbon credits use them in tandem with internal reduction strategies to offset residual emissions — emissions that are too costly or impossible to address with today’s technologies.
It’s time to employ new technologies to hold corporations accountable for their carbon credit claims, too. At Carbon Title, we are adopting blockchain technology to enforce transparent, verifiable, and traceable decarbonization in the building industry. Our carbon credits are unique NFTs that can’t be sold to multiple buyers, allowing users to trace credits back to the source.
It’s often argued that carbon credits enable companies to continue polluting at current rates, implying that carbon credits actively harm the environment.
The reality is more complicated. The fact is, we simply cannot cut emissions to reach the 1.5-degree target without shutting down the global economy. That’s unrealistic. The building industry alone is a prime culprit in carbon emissions, but we can’t stop building homes, schools, or hospitals.
When it’s healthy, our planet can regulate carbon levels, but we’ve reduced Earth’s ability to store carbon through bad behavior. Carbon credits offer ways to invest in removing excess carbon from the atmosphere and undo some of the damage.
The relentless focus on cutting emissions is important, but it’s only part of the picture. We need to cut emissions and remove carbon from the atmosphere. When it’s healthy, our planet can regulate carbon levels by storing it in rocks, sediments, the ocean, and living organisms. Unfortunately, we’ve reduced Earth’s ability to store carbon by clear-cutting forests, polluting the ocean, and managing farmland.
Carbon credits offer companies ways to invest in removing excess carbon from the atmosphere. We can undo some of the damage from the past in addition to committing to a lower-impact future.
You might think that each carbon credit represents one tree planted or one wind turbine installed — and how scalable is that in the face of such an enormous problem? Reforestation projects do have natural scaling limits, despite the important role they play.
Carbon credits help support nature-based solutions and innovative technologies to remove carbon from the atmosphere – and aim to do so at scale. Startups like Running Tide are designing interventions to combat ocean acidification, remove carbon durably on the ocean’s surface, and rebalance the carbon cycle. Among other activities, Running Tide uses carbon buoys, seeded with kelp to create carbon sinks in the ocean.
Another startup, Drone Seed, uses proven reforestation practices with new technology to regrow healthy, resilient, climate-adapted forests after wildfires. For carbon-emitting corporations, these projects are opportunities to invest in scalable solutions to catalyze change. For climate startups, carbon credit funding provides much-needed capital to grow, experiment, measure efforts and optimize over time.
Nature-based solutions like these offer huge potential over the next ten years, as research from McKinsey shows.
Beyond nature-based solutions, other technologies that remove carbon are constantly emerging and require capital to scale. Researchers at MIT, for instance, developed a specialized battery that can remove carbon dioxide from the air at virtually any level, down to the roughly 400 parts per million currently found in the atmosphere. Carbon credits could fund installation of more direct air capture (DAC) plants that suck carbon dioxide out of the air. A DAC installation in Switzerland run by Climeworks removes about 900 tons of carbon dioxide per year.
These projects and others can be better funded through carbon credits. The faster they grow, the faster we’ll learn which technologies can best remove carbon at scale, so we can double down on carbon-removal investments that move the needle.
Both John Oliver and The Wall Street Journal mention “additionality” — the idea that a carbon offset should provide an extra reduction of carbon that wouldn’t have happened any other way, like planting a tree that wouldn’t otherwise have been planted. Too often, carbon offset dollars are going to technologies that don’t need additional funding, such as wind and solar energy. Since these projects are already well-funded, even profitable, additionality is not achieved.
But it’s inaccurate to say all carbon credits are diverting funds from advancing carbon capture technologies. Shopify, Stripe, Alphabet, Meta, and McKinsey are investors in Frontier, a $1 billion funding mechanism focused on accelerating the growth of technology-based solutions to remove carbon at an unprecedented scale. The Gates Foundation committed $1.5 billion to a similar advanced market commitment.
Funding from private-sector companies catalyzes the carbon credit market to develop innovative technologies at scale with a focus on carbon capture, rather than renewable energy which is already financially self-sustaining. What’s more, additionality can still be achieved by funding new solar and wind energy projects in geographies where other funding is lacking to launch these projects.
Who sets standards for quality carbon credits? Are those standards rigorous enough? Most people don’t know much about the answers to these questions, or about how the vetting process needs to evolve.
There are processes in place to vet crediting programs backed by decades of piloting, research, and implementation. Rules governing carbon credit programs are developed by expert review and public consultation that draws on scientific evidence, best practices, and technological advances.
CarbonHerald reveals how DroneSeed uses 'forward-looking carbon offset methodology' to validate their re-seeding projects a year later.
Carbon credits are regulated by two markets: compliance covered markets (CCM) and voluntary carbon markets (VCM). There are around 20 CCMs in the world that are governed by various regulations; McKinsey estimates CCMs are worth around $100 billion worldwide.
VCMs are monitored by the Verified Carbon Standard (VCS) Program. The VCS is administered by Verra with support from the VCS Program Advisory Group. Private sector partners like Stripe and Microsoft are also performing their own due diligence, catalyzing the carbon credit market to meet a higher standard.
Rules governing carbon credit programs are developed by expert review and public consultation that draws on scientific evidence, best practices, and technological advances.
At Carbon Title, we also perform a meticulous vetting process. Credits offered on our platform are third-party verified and monitored through partners like Verra that use scientific validation of carbon accounting methodology. We focus on credits that achieve additionality and remove carbon from the atmosphere. Removal credits include things such as reforestation, kelp/algae farming, or direct air capture (capturing CO2 from air and permanently sequestering it in rock).
We also look for carbon credit partners that can provide a veritable projected duration over which removed carbon will be stored, and identify those responsible for mitigating any reversal (leakage of stored carbon) that occurs. Durability is fundamental to achieving long-term decarbonization.
Finally, by registering carbon credits to the blockchain and retiring them once they are attached to a building, we ensure that each credit remains a unique asset that cannot be resold or double-counted.
Are carbon credits a perfect solution to climate change? No. We won’t be able to measure the impact of many of the carbon removal investments for years. But we have to start somewhere.
Carbon credits remain among the best tools we have to reduce our climate impact. They complement and extend carbon-emissions reduction efforts that are ongoing and necessary. They provide a viable framework for corporations to support carbon removal efforts financially and fund crucial experiments with scaling potential. Vetting processes exist already and are ripe for optimization. Media and consumer scrutiny into these questions is a great way to accelerate the right kinds of change.
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