Some good news on the forefront of climate action: the voluntary carbon market is booming. Forest Trends is reporting a record number of transactions in its recent report and notices continued growth this year, in spite of the Covid-19 crisis. At Climate Focus, we can only confirm this trend. More and more companies are expanding their climate strategies to include additional action through offsetting and investments in forest restoration and reforestation.
An indulgence at best
In particular, carbon markets and voluntary carbon offsetting have had a hard time winning people’s hearts. An indulgence at best, discussions on the duty to reduce and not to compensate, and on the genuineness of purchased certificates have been an ongoing thread ever since the creation of the carbon credit.
Back in the day, power plants and other large emitters in Europe could partly compensate for their emissions from burning coal, oil, and gas by emission reduction certificates from wind farms, hydropower plants, and biomass to energy projects in developing countries. While this mechanism may have accelerated the deployment of renewable energy in China and India, it has left a bit of an aftertaste that the investments may also have happened without the European companies’ buying certificates, and hence offsetting may not have made a difference to the global emissions balance.
On the voluntary side of the market, galore are the anecdotes of backpacking millennials and sharply suited businessmen catching planes as if they were busses, but with a clear conscience as they compensated for their excessive travel by planting a tree or two.
On top of government policies
And still, a booming voluntary carbon market is good news. Because the sobering reality of the Paris Agreement and the underlying national action plans is that they are grossly inadequate to keep global heating within manageable limits. We need more action and we need it fast, faster than our governments deliver. The spike in purchases of carbon credits is massive and voluntary, implying the emission reductions and carbon removals realized actually come on top of any government policies.
Behind the staggering demand for carbon credits this time is not European major polluters or seasoned travelers, but global corporations responding to concerns of their customers, stakeholders, and shareholders. Tech giant Microsoft has hit the front pages by announcing compensation of all its historical emissions in addition to reducing its carbon emissions to zero. UK airline EasyJet is setting a benchmark by compensating for emissions of all jet fuel used in its fleet. By doing so the airline surpasses the climate policy of the global aviation industry that conceded to only compensate growth of the sector after 2020, leaving the bulk of emissions for what they are.
The trend is unmistakable
The increasing corporate interest in additional climate action is a strong incentive for new carbon project development, as the supply of carbon credits is quickly drying up. Carbon credits from wind farms and hydropower are out of business. Growing and protecting trees enjoys more popularity. A forest in Africa communicates a lot easier than a wind farm in China. This is also good news. The carbon payments clearly make a difference for these projects as essential investments in landscape restoration have structurally suffered from lacking finance.
Earlier this year, Unilever established a 1-billion-Euro fund that invests in taking CO2 out of the air by an account of landscape restoration and reforestation. Novartis has successfully been fostering landscape restoration for years. The Swiss pharmaceutical company recently announced plans to expand its commitment to cover emissions in its supply chain. Procter and Gamble is investing in forests, wetlands and peatlands to make up for remaining greenhouse gas emissions at its sites.
We are not used to good news in the fight against global heating. Considering the good news is coming from a group that has yet to earn credibility when it comes to caring for the environment, they may even arouse some suspicion. The numbers are clear, however, and the trend is unmistakable. At the same time, the potential for scaling up quickly is large. And companies can act fast, unlike climate policy makers. When other companies follow the example set by the early movers, investments in carbon removals may become big business and maybe, maybe, this does become big. Which would be more good news.