The Voluntary Carbon Market in 2023

The Voluntary Carbon Market has the potential to generate a huge amount of funding for emissions avoidance and removal projects. Both McKinsey & Company and BloombergNEF have forecast an enormous growth in the market in the coming years.

The reputation of the market has been damaged by a series of high profile scandals and failures. Some of the damage is justified – there are serious shortcomings with some projects out there.

There has been a degree of misleading reporting about them too, which doesn’t attempt to distinguish between different types of project methodology and simply concludes on face value “carbon credits bad”.

My three wishes for the VCM in 2023 :

Independent Ratings and market guidelines become standard

Third party ratings from companies like BeZero Carbon and Sylvera bring analytics and insights to help buyers select projects with maximum efficacy. I see a risk here that unrated projects will be seen in a negative light – we need to accept that “no information” does not mean “bad credit”, and look beyond that at the type of project, the methodology and the location to inform ourselves while ratings coverage expands.

New market guidelines will help raise the bar on usage of carbon credits and help to put claims in context.

Speaking of claims, I’d love to see more use of carbon credits as a contribution a business can make which is not associated with an “offsetting” claim.

Carbon credits should have a place in a wider overall strategy, such as the Boston Consulting Group (BCG) / WWF corporate blueprint for climate action. Disclosure of emissions should always include what remains to reduce.

If a business has bought carbon credits then by all means report that too, but not as an “antidote” to those remaining emissions – rather as a statement of taking responsibility, of setting an internal carbon price, and using it to invest for the future.

Use of blockchain to bring about better transparency

An Earthchain Carbon Ledger certificate, driven by data stored transparently and immutably on the blockchain.

When we started building earthchain we knew we wanted everything tracked on a public transparent blockchain from day 1.

While a traditional database might be considered by some to be “good enough”, we wanted to go further and create a public Carbon Ledger so that any claims anyone makes about credits retired on earthchain can be underpinned with a clear, immutable audit trail.

Web3 can bring a lot of good to the VCM, however it can also deliver a further dose of reputation risk. Overhyped tokens bought simply as a “gold rush” rather than with climate action in mind of the buyer concern me, as does the usefulness of shiny collectible style NFTs to represent climate action. It can be quite difficult to explain the utility of web3 without hearing the word “ape” uttered back at you with a smirk.

The fact that the bigger registries Gold Standard and Verra are running working groups to explore digital assets in the VCM is a good sign. Multi-stakeholder consensus will help to set standards. We’re proud to be involved with Gold Standard’s working group.

New methodologies reward behavioural change

Can we come up with some more innovative ways to achieve behavioural change by rewarding individuals for lowering their carbon emissions ?

Carbon credits which generate funding to reward behavioural change could drive increased adoption of low carbon transportation - like cargo bikes seen here in Zurich

There are some interesting approaches out there, such as MyClimate’s eCargo Trike project

Surely, if we can create a carbon credit which pays an enterprise business for cleaning the bottom of a ship, or a credit for a major airline to clean out their jet engines, we can create one which enables ordinary people to be rewarded for cycling to work, or taking the public transport in place of their cars. Technology will drive these initiatives through integration into payments systems and mobile apps.

Overall, making the general public feel part of the solution and able to have their own impact can drive willingness to adopt larger societal changes. Policy which is seen as “imposed from above” feeds into fears about authoritarian governments, and even conspiracy theories about non-governmental groups such as the WEF.

But we will never see widespread acceptance of change if the mitigation measure is perceived as “punishment” by the public. LTNs, ULEZ, higher costs for sustainable products and energy – these things all feel like a penalty if they are not delivered in a way which encourages acceptance, and rewards the community for adopting them. ULEZ can mean “pay to pollute” with those able to afford the permits continuing to pollute – that doesn’t feel terribly equitable to me.

Summing up

I’m excited about what wider participation in and the growth of the voluntary carbon market could achieve for decarbonisation. Ratings and guidelines will bring much needed transparency and insight to help focus on quality. Innovations like blockchain carbon ledgers will make any claim visible and hold those who retire carbon credits as part of their strategy to their claims. And finally, earning rewards for behaving more sustainably will far better motivate an individual than shaming, restriction of freedoms or what is perceived as punishment.

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