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Across industries, companies are taking drastic actions to minimize their environmental impact, from reducing carbon emissions to using recycled materials to minimizing business travel. Carbon offsetting has become a key strategy for forward-thinking companies looking to significantly reduce their climate impact.
The voluntary carbon market is expected to grow from $2 billion in 2020 to around $2 billion. $250 billion It shows immense viability to deliver meaningful climate solutions by 2050.
But for the industry to reach its full potential, companies need clarity and transparency in the process of choosing carbon credits. For companies looking to meaningfully reduce their carbon footprint, there can be concern and confusion about choosing the “right” credits, i.e. credits that actually provide the consideration paid. Voluntary carbon markets lack clear standards and can be difficult to navigate for companies looking to do the right thing.
Related: Carbon credit market could grow 50x: How one pioneering platform is meeting demand
What are carbon credits?
It is important to make significant progress in reducing corporate carbon emissions. However, there will inevitably come a time when organizations will reduce their total emissions as much as possible. To fill this carbon gap, companies rely on carbon credits. Carbon credits mean the removal or protection of carbon by others.
Companies buy carbon credits from projects that remove legacy carbon trapped in the atmosphere and protect existing carbon stocks from being released. Both are needed to reverse the climate crisis.
For example, the crops of the world’s two billion smallholder farmers naturally capture carbon from the atmosphere and return it to the soil. Using sensors, satellite imagery, AI and regular monitoring, this stored carbon can be tracked and quantified and sold as carbon credits.
Most companies buy carbon credits through voluntary carbon markets. This market is quickly emerging as a key tool to help companies meet their climate change goals. These carbon credits are a proven tool for offsetting emissions, but there are many options that vary in quality and impact.
Why Carbon Credits?
Risk is the biggest driver in business, trillions of dollars Annual climate-related costs and damages – The climate crisis is fast becoming a business crisis. Companies need to act now to minimize losses, educate shareholders on meaningful climate action, and comply with fast-approaching climate regulations.
Carbon credits are an important approach to scaling climate action globally and a rapidly growing strategy for meeting corporate ESG goals. These offsets are part of nearly any scenario that limits global warming to 1.5 degrees Celsius, yet traditional carbon markets lack broad public confidence. Impactful carbon solutions require clear guidelines and proven, verifiable data.
Enabling transparency with data
Consider the following data when choosing carbon credits:
- What kind of data is provided — is it clear? WHO responsible for carbon sequestration (i.e. small farmers), and how They are doing it (i.e. through regenerative farm crops?
- How is carbon dioxide removal calculated?
- Who is verifying the data — a third party?
- Is the carbon data auditable (this is especially important for publicly traded companies given the rapidly approaching SEC climate disclosure rule)?
Companies need auditable and transparent climate and social impact data to communicate their actions to their major shareholders.
A lack of transparency about the positive and negative impacts of where carbon comes from, how it is captured and stored, and how it is calculated poses enormous risks for businesses. faulty carbon credits.
Investors should look to carbon credits that allow the sourcing of credits to be traced back to specific farms and communities, and that can reliably quantify how those communities are benefiting from the carbon market.
CLIMATE JUSTICE: INTEGRATING SOCIAL AND ENVIRONMENTAL IMPLICATIONS
Whereas traditional carbon markets have rarely focused on socio-economic impacts, the burgeoning generation of carbon markets will prioritize both social and environmental impacts in models. In practice, these carbon credits benefit the environment while fairly compensating those responsible for carbon sequestration. These carbon managers are often among the most vulnerable, including smallholder farmers, women and indigenous communities.
When buying carbon credits, ask those selling carbon credits a few basic questions to ensure carbon managers are rewarded fairly.
- What language do they use when discussing partnerships with carbon managers?
- Is their data auditable?
- Is the financial model for carbon credits disclosed? Are carbon managers fairly and timely compensated?
- Is socio-economic improvement data shared with investors according to accepted third-party standards?
Incorporating social and environmental impacts into next-generation carbon markets could further increase their value and benefit vulnerable communities that play a key role in carbon sequestration. A well-designed carbon credit protocol can financially incentivize carbon managers to step up their future efforts, thereby increasing the positive socioeconomic and environmental impacts on future generations.
Other tactics for carbon removal
Mechanical carbon capture takes the form of large machines that effectively suck and store carbon dioxide from the air, burying it underground or otherwise reusing it. Mechanical carbon capture is promising, but the technology is still in its infancy, is very expensive, and has proven to be scalable.
RELATED: Blockchain could help fight climate change — here’s how.
now is the time
The current forecast is Earth will reach a threshold of 1.5 degrees Celsius This could cause massive damage, loss of life and trillions of dollars in damage to the global economy much sooner than previously anticipated.
This is the moment when everyone works together. We must take proven, credible and equitable methods to address what might be the greatest threat to the future of humanity and the planet we live on. Carbon credits, if implemented responsibly and at scale, can be a highly effective tool for humanity to use in the fight to limit the damage caused by climate change. However, industry growth depends on greater transparency and standardization to ensure that carbon credits deliver on their promised impact.