A breakthrough agreement could open doors for companies and policymakers looking to jump-start the international carbon credit system, which has come under increasing scrutiny by environmental advocates who say the credits allow firms to sidestep real climate action.
The agreement, which was made public by the United Nations Framework Convention on Climate Change on Saturday, features guidelines for businesses and nations to receive verified carbon credits issued by the world body for trade on the global carbon market.
The new U.N. recommendations provide guidance on what offsetting projects can earn carbon credits. To qualify, the project needs to significantly reduce emissions, and the reductions must be in addition to carbon cuts that would have occurred otherwise. Any offsetting can only be counted once for the nation or business purchasing the credit.
For many groups that support a market-based approach to reducing global emissions groups, the guidelines are a win — if they’re ratified by voting parties at the upcoming COP28 U.N. climate conference in Dubai.
In a regulated global carbon market, nations and businesses can profit by selling verified carbon credits generated through green projects such as reforestation, clean energy development and carbon removal. Countries or companies buying the credits can count them toward their emissions reduction targets.
The existing $414 billion voluntary carbon market has been plagued by accusations of fraud against businesses that claim to prevent deforestation and sell carbon credits by saving trees. And many carbon offsetting companies selling carbon credits overstate or completely miscalculate the amount of carbon offset, said Jonathan Crook, an expert at Carbon Market Watch, a nonprofit group that monitors carbon markets.
Other climate groups that are skeptical of the carbon market as a climate solution say that those attending COP28 should focus not on carbon credits but on cutting out fossil fuels.
“Carbon markets and offsets are a really dangerous distraction from what we actually need to do, which is a well-funded phaseout of all fossil fuels,” said Erika Lennon, a senior attorney at the Center for International Environmental Law. “We’ve seen that carbon markets just allow carbon to be traded around the world without really reducing emissions.”
Another major sticking point in the new guidelines is that they allow carbon credits to be generated from carbon removal projects, which capture existing carbon dioxide from the atmosphere and store it deep underground.
Those projects have come under increasing scrutiny from environmentalists like Lennon, who said carbon removal technology is currently unscalable and extremely expensive. She added that governments and businesses should expand on proven clean energy technologies to achieve the deep emissions reductions needed to tackle climate change.
Some climate advocates are optimistic that the new guidelines are a step in the right direction — though there are still specifics to be ironed out before a useful carbon market is created, said Nat Keohane, an economist and president of the Center for Climate and Energy Solutions, a climate nonprofit group.
“I see this as part of a much bigger puzzle in terms of getting finance flowing as fast as we can to reduce emissions and power sustainable, green growth and development,” he said.