If you work in sustainability, there’s little doubt you will have heard about the carbon markets debate. Proponents see carbon credits as a way for companies to reduce their emissions while simultaneously funding conservation and restoration projects proportional to the greenhouse gases they emit.
Opponents, on the other hand, view these tokens of carbon removal or reduction as problematic. In a letter shared this summer, opponents from more than 80 NGOs broadly rejected carbon credits as a financing mechanism for climate mitigation projects and specifically opposed the possibility of the leading net-zero standard body, the Science Based Targets Initiative (STBi), allowing companies to use carbon credits to meet their climate targets.
While this might seem a niche disagreement, it’s emblematic of a deeper problem in the climate space: Not enough time is spent seeking common ground – and straw man arguments abound.
A carbon market cartoon villain
The letter’s rationale is simple and the argument compelling: Companies cannot use carbon credits to lower their emissions, any more than we can offset our way out of the climate crisis. Therefore, the NGOs argue that the only legitimate responses are real, ambitious emissions cuts.
But this is a straw-man argument. These organizations are refuting a point that differs from the original one raised. Carbon market proponents don’t disagree with the letter’s point, nor are they lobbying for companies to use credits as an alternative to cutting emissions. As Nathan Truitt of the American Forest Foundation puts it, this is a “cartoon villain version of carbon markets that literally nobody believes in.”
Like these NGOs, carbon credit advocates want to see business leaders reducing their company’s emissions. However, proponents also think there should be some flexibility in meeting corporate climate targets. Standards must reflect the real world – companies cannot cut all their emissions “overnight” – and should support strategies that allow corporations to compensate for those which remain in the short term.
More important, the position of carbon market proponents in the Global North has been expressed time and again by people from the Global South, African countries and NGOs based in the most vulnerable locations. Some support carbon credit projects because they provide local people with a financial incentive to keep forests standing. Others view carbon credits as an alternative to traditional aid or environmental reparations because the revenue earned by the projects can be shared on the ground directly. Fundamentally, many see carbon credits as a way to transfer finance from high-emitting Global North countries to those in the typically lower-emitting Global South.
For these reasons, carbon market proponents penned a response to the recent letter. In it, another group of NGOs argued that companies should be allowed to use carbon credits to compensate for a portion of their remaining emissions – but not recklessly. CSOs should only use carbon credits if they follow clear guardrails and a mitigation hierarchy, a framework guiding CSOs to only use carbon credits after they implement reductions in their own operations as much as possible.
When the core principles and positions of the two open letters are compared side by side, there is a huge, and perhaps surprising, amount of alignment. This is visible in the graphic below which shows only four points of divergence. While the graphic has been simplified for illustrative purposes and people can hold both anti-market and pro-market sentiments, it’s remarkable how much common ground there is.
One main area of alignment is support for mitigation hierarchy. No one wants companies to use carbon credits without also cutting emissions. Not only would that be disingenuous, it’d also be dangerous. With global temperatures already exceeding the 1.5-degree Celsius threshold identified in the Paris Agreement, there is no time to delay reduction efforts.
What’s more, there is a growing body of analysis and research suggesting that carbon credits don’t disincentivize corporate climate action as market opponents fear. Studies have found that companies buying carbon credits are generally decarbonizing faster than those who don’t. This might be because credits are typically bought as part of a wider sustainability strategy and understanding of impact, not as an isolated step within a corporate culture of climate inaction. Also, in setting a climate target, companies are putting an internal cost on carbon which they then prioritize reducing.
Of course, this doesn’t mean the verdict is in. More research needs to be done and we need to develop better methods for determining which emissions are truly hard to cut, on a sector-by-sector basis. We also need better methodologies to assess whether companies are on track to meet their climate targets. But when you consider all the challenges that climate change presents, the areas of disagreement between these opposing camps seem eminently solvable. If we fail to find the middle ground in this debate, we could push our global climate goals further out of reach.
How can companies leverage the common ground?
Rather than starting from scratch, carbon market proponents believe it’s better to improve the climate solutions we already have to help tackle climate change right now. But this leaves CSOs in a bind — as the carbon credit debate continues to evolve, what practical steps can they take now?
Many sustainability leaders are wondering if they can use carbon credits to address a portion of their Scope 3 emissions. Before that’s possible to answer definitively, there are important accounting questions to consider. For example, would credits be used to cancel out value chain emissions? Or would they compensate for emissions remaining above any science-based target the company has set? While this is technical, it’s highly important. The answer will determine the volume of greenhouse gas emissions that must be cut before carbon credits can be bought.
This is why proponents are calling on companies to work through the nuances of carbon markets. Bayer, the pharmaceutical and biotech company, is an example of a large multinational that has embraced the nuance of carbon markets. It’s accepted that the space is evolving, but that it’s the best solution available to corporations now. In an accelerating climate crisis, Bayer is not letting the pursuit of perfection be the enemy of the good.
Even for the most pragmatic carbon credit opponents, there is enough common ground for practical solutions. Constructive dialogue can win the day if critics and proponents can meet halfway, and bold companies are ready to stand behind carbon markets as a viable, practical climate solution.
