Can we get carbon credits right?
Another day, another carbon credit certification exposé, more suspensions, more picking through debris to work out who is right and wrong. With a strong whiff of bad behavior, certified carbon credit credibility is crashing. Can we get carbon credits right?
Empirically, it feels that carbon credits should be a key element of credible climate action. They aim to direct much needed finance toward reducing emissions and removing carbon from the atmosphere. As the repeated exposés suggest, too often, for many proponents, getting that finance into their personal bank accounts is way more interesting than any climate objectives and it’s the misallocation and sometimes misappropriation of funds and thin climate achievements on so many certified projects that have led to the harsh and often well justified criticisms. This lost confidence comes just at the time when we need as much finance directed toward positive climate outcomes as possible, especially for forest protection and agricultural regeneration.
It begs the question of whether we can we get carbon credits right.
I think we can, and I think we must, but to do so, we need to go back to first principles and take stock of what works and be more rigorous in our implementation.
Transparency and Trust
Something that blights carbon credits is the almost total lack of transparency surrounding them. This is true for how companies calculate their carbon emissions and for how offsetting projects are developed. Both, for the most part, are black boxes; there’s just no transparency.
“Ah, we have certification to deal with that!”
Yes, we do, but as I’ve written elsewhere, certification is a broken, corrupted system and all the recent exposés highlight bogus practices in certified projects. Certification in its current form is not the answer, indeed, it’s in disarray, and that’s partly because there’s no transparency in the process. Certification supported by complete transparency can be a powerful tool, but the system needs to change before it can be a catalyst for good.
This lack of transparency suppresses trust. If you can’t trust that your investment will make a real impact, you don’t invest. Exposés choke funding flows to good projects because investors just don’t trust the process.
Conflicts of interest everywhere
The biggest problem with certification is the baked in conflict of interest that exists on multiple levels. I pay you to certify that I’m doing a good job, compliant with the standard. If you don’t issue a certificate, I may not pay you and I’ll just go down the road and find another accredited certification body who will certify, generally for a much lower cost. It’s the same cert, why pay more? This has driven a race to the bottom.
Another conflict is that everyone makes money when certificates are issued. When they’re not, fees don’t flow to project developers, certifiers or certification scheme owners. No cert, no moola, so guess what? Certificates get issued everywhere, for everything, anywhere.
Voluntary standards versus scientific, consensus-based standards
And that’s why we have so many voluntary standards; to facilitate that beautiful money-making process. The explosion of voluntary standards in the last decade and more, many owned by VC companies because there’s so much money to be made, hasn’t driven a concomitant surge in positive people and planetary impact. It’s not all bad, and there’s no problem with people making money, but how about the positive impacts?
There are scientific, consensus-based standards – think ISO – but how many big companies, who love to say they’re ISO9001 or ISO14001 certified, sing about their carbon emissions calculations being verified under ISO14064-1? Never heard it, right?
There is a system to bring integrity to voluntary standards – the Integrity Council for the Voluntary Carbon Market (ICVCM) – but the recent palaver with the Science Based Targets initiative revealed that the integrity body is open to influence by funders. And that’s before we discuss who is on the ICVCM Board.
The whole certification process around voluntary standards has become corrupted and if its to make any climate impact, it needs to build radical transparency into its systems.
Strong action please
Rewarding actions that really do make a positive impact is critical. So many offsetting projects live in the realm of dreams. What might happen in an imagined future without the project, projecting baseline behaviors forward, is measured against what might happen in an imagined future with the project where, it’s argued, that negative outcomes will be replaced by wholesome, wonderful actions that make a dramatic impact. The bigger the delta, the larger the volume of carbon credits that can be certified and sold. Project developers have become master story-tellers adept at making the delta larger than life. Certifiers are happy to comply because everyone gets a cut when credits sell, and a good story sells more credits. Everyone, except those on the ground doing the climate action, gets rich while the climate continues down the toilet.
It's a farce.
Additionality nonsense
Those who have protected forests, or who have stored carbon in their soils are cast aside because of the flawed implementation of ‘additionality;’ it’s become the bane of climate action. Additionality has come to mean that climate finance can’t flow to actions that were already happening before a proposed project. If you’re protecting your forest, good work, just don’t expect any climate finance reward. That’s not always the case as recent exposés in the US have shown. Forests that really faced no threat at all were generating significant revenues for project developers, certifiers and project proponents because they’d all gotten together to tell a fake story of impending doom. Companies bought into the farce because it greened their image. Lots of winners in all that, just not the climate.
Additionality, as it was originally conceived, meant that without climate finance, actions that protect and remove carbon would be at risk. Climate finance could thus be used to reward those who were protecting forests, but whose protection efforts were vulnerable because of economic, environmental or social factors.
We need to get back to that original concept.
High-cost certification barrier
Good projects where forests are truly threatened go unfinanced, generally because the cost of getting certified is prohibitive. Companies with the finance and the willingness to spend it have been convinced by certifiers, their peers who pump up the joy of certification with large marketing budgets so they can show their certs and pretend their heroes, and the lack of trust around carbon credits – which is paradoxical given the long list of exposés involving certified projects – mean that only certified projects are trusted.
The cost for good projects to get on anyone’s radar when the radar demands certification, is out of reach. We need a better system that not only verifies claims inexpensively, but that democratizes the process, allowing anyone to check what’s happening because claims are supported with radical transparency. This will galvanize trust.
High-cost project developers
It’s a myth that only expensive project developer consultants can produce the required documents to achieve certification. In many contexts, there are existing systems and organizations who can do the required work, yet the system has evolved, again through glitzy marketing, to believe that only the big, expensive dudes can nail it.
High-cost credible credits and the allocation of revenue
The cost of apparently credible credits has skyrocketed because everyone wants certified credits, but there are so few certified projects out there. Buyers are nervous to move because they could spend a fortune on credits that tomorrow are shown to be farcical, damaging their reputation in the process. We’ve just seen Brewdog’s announcement that they’re no longer buying credits. At least they’re instead investing in their own project to grow trees, and that’s the second point – we need funds to be allocated to where it makes strong, positive impact.
Right now, when a credit is sold, most of the revenue generated from the sale goes to project developers and certifiers. It’s a miracle if the people implementing the climate action get 10%. That’s silly and just speaks to the system’s brokenness.
Carbon third – rewarding co-benefits first, we come back to transparency
“Carbon, carbon, carbon” is the shout from so many projects. “Oh, and yes, we help people and biodiversity too, somewhere along the way.”
Much is made in marketing materials of a project’s carbon benefits while benefits to communities and the broader environment are added extras. This needs to change. Benefits to people, biodiversity and the planetary ecosystem need to come first, “Oh, and by the way, we protect and remove carbon from the atmosphere too.”
And it’s not enough to just say you’re doing these things; you need to verify it through radical transparency. If you claim to be helping soils, show data to prove the soil metrics are improving. Likewise, people – show the data. Only then can investors grow the trust that projects are walking the talk.
In summary then, what’s needed to right the carbon credit ship?
Radical transparency at all levels really is the key that will restore and ignite trust in the carbon credit system. No more cloak and dagger. It’s difficult to completely avoid the conflict of interest inherent in the system – users must pay for the services they receive – but if every transaction was made transparent, that would alleviate many concerns.
Beyond that commitment to radical transparency, we need:
Democratized verification processes
Scientific, consensus-based standards
Real impact on the ground for people, planet and only then carbon
Sensible approaches to additionality
Sensible costs for project development and certification
Sensible process to come to market
Fair and sensible allocation of revenues
Strong reward co-benefits across all projects.
None of these things are difficult to implement. We just need the people behind the carbon credit system to find their way back to first principles and build from there. Don’t worry guys, there’ll still be plenty of money in the system to pay you, but there’ll be real long-term benefits to go with it and while there’ll no longer be a trough, there will be long-term revenue generation for your businesses and personal accounts and the trust that’s generated will mean more money flows into the system. Right now, bad behavior is killing your goose.
I’m happy to say that there is at least one new approach out there that’s striving to do exactly these things. It’s called ReSeed, and I’ll share more about them and their work in my next text. Oh, and conflict of interest alert, I’m advising ReSeed and getting paid to do so, but I’m doing that because my sense is that they’re one of the few, if not the only, approach out there that puts people and the planet first. I want to make what they’re doing the benchmark; I want them to succeed. Check them out.
Photo for this blog is from Unsplash in collaboration with Getty Images