With a staggering 2,400 billion metric tons of CO2 released into the atmosphere between 1850 and 2019&mdash;42% of it between 1990 and 2019 (IPCC, 2023)&mdash;it has become undeniable that schemes to reduce future emissions, like carbon taxes, are no longer enough: the world is in urgent need of large-scale programs that deal with carbon already in the atmosphere. People will continue to rely on certain industries, like aviation, that most likely will be unable to significantly reduce their carbon emissions in the near term; it is then crucial to consider carbon dioxide removal (CDR) as a strategy for combating both past and future emissions.
We can imagine our carbon situation through the metaphor of an overflowing bathtub. Water keeps flowing from the tap (carbon emissions) and we urgently need to turn it off (emission reductions). The problem, however, is that even if we manage to turn off the tap, we still need to figure out what to do with the water spilling over the bathtub&rsquo;s edges (CDR).&nbsp;
We need to unclog the drain, let some water out, and mop the floor. Carbon taxes cannot drain the bathtub and stop the spillage. For that, we need CDR strategies. The Paris Agreement mitigation goals are slowly evaporating before us, unless a shift in policy solutions occurs. Achieving net-negative greenhouse gas (GHG) emissions globally will require the large-scale development of a portfolio of CDR systems and a complete transformation of our consumption model. Scaling these solutions, however, entails significant costs as well as risks of perpetuating socioeconomic inequalities. The introduction of carbon trading markets may offer significant pathways forward in the funding of CDR strategies and the fight for climate justice. The question is therefore how to approach carbon markets with a social and ecological justice policy approach that centers CDR at its forefront of priorities.&nbsp;
<h3>Carbon Credits: A Controversial Weapon in the Climate Fight</h3>
The Kyoto Protocol, adopted in 1997 and signed by over 150 nations, laid the foundation for a global carbon market. The climate agreement allowed countries with an abundance in emissions capacity to sell their surplus to nations struggling to meet their targets, and subsequently introduced a market-based instrument, the Clean Development Mechanism, for emissions reduction.&nbsp;
Since then, carbon trading has evolved in multiple ways, at times seen as the optimal response to climate change and at other times left in oblivion. At COP26, nations agreed on new market mechanisms to support the trade in emissions between countries and to incentivize the private sector to invest in climate-friendly solutions. These trades are mediated through the exchange of carbon credits.
In compliance markets, governments set emission caps for certain sectors, and companies must buy or use saved credits to stay within these limits. This cap-and-trade system aims to regulate GHG. In voluntary markets, participants are not legally required to offset their emissions but choose to do so as part of their corporate social responsibility, sustainability goals, or environmental reputation.&nbsp;
Some civil society organizations, however,&nbsp; have criticized the exploitative &ldquo;greenwashing&rdquo; practices that carbon credits permits polluting firms and nations (Pierini, 2023) Critics argue that carbon credits allow developed countries to continue their unsustainable practices by outsourcing emissions reduction efforts to vulnerable populations in the Global South (Raji, 2022). A study conducted by Lancet Planetary Health that considered population and geographic size found that as of 2015, the Global North accounted for 92% of worldwide emissions since 1850; the United States alone contributed 40% of the total and the European Union 29% (Robinson, 2022).
Moreover, not all carbon credits are created equal when it comes to environmental and social justice. Some carbon credits are issued in lieu of a certain amount of CO2 emissions while others are created through investment in the adoption of CDR methods by underprivileged communities. A good quality carbon credit represents genuine, verifiable emission reductions or carbon removal through projects that adhere to recognized standards and deliver additional social, economic, and environmental benefits. In contrast, a bad quality carbon credit lacks transparency and independent verification, and may not lead to real emission reductions or contribute positively to sustainable development. The social impact is thus a key component to consider when assessing the quality of a carbon credit. Despite their controversial nature, carbon credits have the potential to provide much-needed lines of credit to support underprivileged communities and their hopes for sustainable development. In certain agricultural systems, carbon can enhance soil fertility, leading to improved crop growth, increased water storage, and a healthier farm.&nbsp;
Regenerative agriculture focuses on better carbon storage management, resulting in healthier soil and more sustainable food production. This approach promotes sustainable farming practices that capture atmospheric carbon and store it in the soil, improving agricultural output, reducing soil erosion, and providing farmers with a new revenue stream through the sale of carbon credits (Demand for Carbon Removal, 2021)&nbsp;
<h3>Toward a Responsible Voluntary Carbon Market</h3>
Small Is Beautiful is a collection of essays by British economist E.F. Schumacher, hailed as an &ldquo;eco-bible&rdquo; by Time magazine. First published during the 1973 energy crisis, the book grew in popularity, sparking an environmental movement that believes economic growth must be responsibly balanced with socio-ecological needs.&nbsp;
Schumacher envisioned a people-centered economics to promote environmental and human sustainability. Policymakers should be working toward the creation of a carbon credit system that both benefits the planet and improves the conditions of vulnerable communities.&nbsp;
Doing so requires a transparent, verifiable, and environmentally responsible voluntary carbon market that would have positive knock-on social impacts. The market currently faces challenges such as fragmentation, complexity, and concerns regarding the validity of some emissions reductions represented by carbon credits. Moreover, limited pricing data complicates the process of determining fair prices for buyers and managing risks for suppliers in carbon reduction project financing (Betz et al., 2022). The social justice component of the carbon credit is not always included in its description.&nbsp;
If the voluntary carbon market remains for now an ad hoc one, it should progressively be integrated in a consistent carbon emissions balance sheet. In order to do so, more effort should be done at the policy and institution level:&nbsp;
<ul style="text-align: justify;">
<li style="font-weight: 400;" aria-level="1">Developing clear and consistent standards: Introducing unified standards for carbon credits to increase transparency and the credibility of emissions reductions. Such standards should not become a barrier to entry for small-scale CDR projects that cannot comply with complex regulatory systems. Simplified standards should be streamlined by including the social component of the community creating carbon credits.&nbsp;</li>
<li style="font-weight: 400;" aria-level="1">Centralizing pricing mechanisms: Establishing a centralized pricing database or platform to simplify price discovery and facilitate informed decision-making for buyers and suppliers. Verifiable information around the identity of the carbon credit emitters is the cornerstone of a more equitable market.</li>
<li style="font-weight: 400;" aria-level="1">Encouraging innovative financial instruments and risk management tools: Promoting the development of products, such as carbon credit futures or options, to help suppliers manage financing risks. Such options should be mainstreamed as potential financing tools for small-scale farmers.&nbsp;</li>
<li style="font-weight: 400;" aria-level="1">Supporting an international regulatory framework: Advocating for a unified global approach to the voluntary carbon market to promote harmonization and reduce fragmentation across jurisdictions.</li>
<li style="font-weight: 400;" aria-level="1">Fostering market growth through incentives: Offering incentives for early adoption and participation to encourage businesses to reduce their carbon emissions.&nbsp;</li>
<li style="font-weight: 400;" aria-level="1">Facilitating collaboration between the public and private sectors: Fostering knowledge sharing and the development of best practices for emissions reduction through partnerships between governments, businesses, and non-governmental organizations.</li>
</ul>
Implementing these policy changes and promoting collaboration among stakeholders can strengthen the voluntary carbon market, enabling it to better support global emissions reduction efforts and contribute to a sustainable, low-carbon future.
In addition to these challenges, carbon credit buyers and sellers face issues related to the scarcity of high-quality credits, inconsistent accounting and verification methodologies, and unclear co-benefits. Improving verification methodologies, streamlining processes, and providing clearer demand signals can increase suppliers&rsquo; confidence in their projects and attract financing from investors and lenders.
An efficient large-scale voluntary carbon market requires shared principles for defining and verifying carbon credits. Establishing &ldquo;core carbon principles&rdquo; for quality criteria and standardizing additional attributes in a common taxonomy can simplify marketing for sellers and help buyers find suitable credits. This approach would also enhance the liquidity of the voluntary carbon market, allowing for more efficient trading and better matching of buyers and suppliers (Blaufelder et al., 2021).
Recently, the CEO of Verra, the world&rsquo;s leading carbon credit certifier, announced his resignation amid concerns that the Washington-based nonprofit had approved tens of millions of potentially worthless offsets used by major companies to meet their climate and biodiversity commitments. Some companies, such as Gucci, are moving away from offsets due to these concerns (Greenfield, 2023). Such episodes affect the overall reputation of carbon credits and can harshly impact small-scale, community-based CDR, compounding social injustice instead of ameliorating it.&nbsp;
Comprehensive reforms are needed to ensure the credibility and effectiveness of the voluntary carbon market in supporting global emissions reduction efforts. By addressing fragmentation, complexity, and legitimacy concerns, as well as fostering collaboration and transparency among stakeholders, the market can play a vital role in financing climate mitigation while having a positive social impact on underprivileged communities, leading to a more sustainable and low-carbon future.
<hr>
References&nbsp;
<ul>
<li style="text-align: left;">Betz, R., Michaelowa, A., Castro, P., Kotsch, R., Mehling, M., Michaelowa, K., &amp; Baranzini, A. (2022). The Carbon Market Challenge. Cambridge Core.<a style="color: #2350ea;" href="https://www.cambridge.org/core/elements/carbon-market-challenge/9261122253200C956EAF02B5C9AF53C8"> https://www.cambridge.org/core/elements/carbon-market-challenge/9261122253200C956EAF02B5C9AF53C8</a></li>
<li style="text-align: left;">Blaufelder, C., Levy, C., Mannion, P., &amp; Pinner, D. (2021, January 29). A blueprint for scaling voluntary carbon markets to meet the Climate Challenge. McKinsey &amp; Company.<a style="color: #2350ea;" href="https://www.mckinsey.com/capabilities/sustainability/our-insights/a-blueprint-for-scaling-voluntary-carbon-markets-to-meet-the-climate-challenge"> https://www.mckinsey.com/capabilities/sustainability/our-insights/a-blueprint-for-scaling-voluntary-carbon-markets-to-meet-the-climate-challenge</a></li>
<li style="text-align: left;">Demand for Carbon Removal. Climate Change Academy. (2021).<a style="color: #2350ea;" href="http://climatechangeacademy.com/courses/carbon-removal/2"> http://climatechangeacademy.com/courses/carbon-removal/2</a></li>
<li style="text-align: left;">Greenfield, P. (2023, May 23). CEO of Biggest Carbon Credit Certifier to resign after claims offsets worthless. The Guardian.<a href="https://www.theguardian.com/environment/2023/may/23/ceo-of-worlds-biggest-carbon-credit-provider-says-he-is-resigning"> https://www.theguardian.com/environment/2023/may/23/ceo-of-worlds-biggest-carbon-credit-provider-says-he-is-resigning</a></li>
<li style="text-align: left;">IPCC. (2023). the Intergovernmental Panel on Climate Change. IPCC.<a href="https://www.ipcc.ch/report/ar6/syr/downloads/report/IPCC_AR6_SYR_SPM.pdf"> https://www.ipcc.ch/report/ar6/syr/downloads/report/IPCC_AR6_SYR_SPM.pdf</a></li>
<li style="text-align: left;">Pierini, J.-B. (2023). Carbon offsetting - greenwashing The climate disaster. Greens/EFA.<a href="https://www.greens-efa.eu/opinions/greenwashing-the-climate-disaster/"> https://www.greens-efa.eu/opinions/greenwashing-the-climate-disaster/</a></li>
<li style="text-align: left;">Raji, K. (2022). Is carbon offset a form of greenwashing?. Earth.Org.<a style="color: #2350ea;" href="https://earth.org/is-carbon-offset-a-form-of-greenwashing/"> https://earth.org/is-carbon-offset-a-form-of-greenwashing/</a></li>
<li style="text-align: left;">Robinson, C. (2022). It&rsquo;s time for the global north to take responsibility for climate change. Global Social Challenges.<a href="https://sites.manchester.ac.uk/global-social-challenges/2022/07/16/its-time-for-the-global-north-to-take-responsibly-for-climate-change/"> https://sites.manchester.ac.uk/global-social-challenges/2022/07/16/its-time-for-the-global-north-to-take-responsibly-for-climate-change/</a></li>
</ul>

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