Market for Carbon Credits Faces Fresh Blow as Offsets Slammed

(Bloomberg) -- The market for carbon credits is facing a renewed wave of opposition as climate activists deliver a fresh warning to companies and governments not to use such financial instruments to offset their emissions.

More than 80 nonprofits have teamed up to declare that carbon offsets are undermining genuine net zero action, and are now calling for the total blacklisting of such instruments in climate regulations and guidelines.

ClientEarth, ShareAction, Oxfam, Amnesty International and Greenpeace are among those calling on companies to focus on the outright reduction of greenhouse-gas emissions without the use of offsetting. 

“Allowing companies and countries to meet climate commitments with carbon credits is likely to slow down global emission reductions while failing to provide anything like the scale of funds needed in the Global South,” the group said in a statement. It also would reduce “pressure to develop large-scale mechanisms such as ‘polluter pays’ fees on emission-intensive sectors.”

For that reason, “voluntary and regulatory frameworks on climate transition planning must exclude offsetting,’’ the group said.

The nonprofits say they’re responding to what they characterize as a “growing push” to normalize offsetting as a mainstream path toward reporting lower emissions. As a key example of this, the group points to a controversial statement made in April by the board of the Science Based Targets initiative, which said credits could be used to offset emissions from supply chains, a category that often represents the lion’s share of a company’s carbon footprint.

The extent to which carbon credits should be used is becoming an increasingly divisive issue in climate finance. Efforts are currently underway to revive the offset market, after studies showing it was rife with inflated green claims left a sizeable dent. Critics say it’s still close to impossible to verify the true climate impact of such credits.

The US government has sought to inject greater credibility into the offsets market, including giving its official blessing in May that credits should be an accepted part of climate finance. There are also nonprofits, including Conservation International, the Environmental Defense Fund and the Nature Conservancy, that have endorsed SBTi’s proposal to allow greater reliance on credits.

The nonprofits behind Tuesday’s joint statement said that allowing companies and countries to meet climate commitments with carbon credits threatens to hamper efforts to fight climate change.

“Offsetting, at best, does not reduce the concentration of greenhouse gases in the atmosphere, it simply moves emission reductions from one place to another,” they wrote. “The logic of offsetting is built on the idea that one entity gets to keep emitting. For this reason, offsetting often ends up providing the social license for high-emitting activities to continue while reinforcing past injustices.”

What’s more, scientific literature “has shown significant quality issues” with carbon crediting programs, often resulting in worthless credits.

“Carbon credits send a misleading signal about the efforts required to pursue climate action, and they undermine carbon prices by providing a false sense of the existence of ultra-cheap abatement options around the world,” the nonprofits said. Such financial instruments also risk “disincentivizing the significant investments needed to ensure profound changes to corporate value chains and economic systems.”

(carbon)

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