Despite efforts to up ambition, the climate pledges by governments remain woefully inadequate in limiting average global temperature rise to 1.5℃ – the figure climate scientists define as the threshold of safety.
We know that targets have been set – but society's ability to meet them moves further out of reach every day. The annual UN Emissions Gap report remains a constant reminder of the yawning gap that persists between the emission reductions considered in governments' climate pledges and the reductions we need.
In today's divided age, one of the few things that most of us can agree on is that we must dramatically increase the speed and scale of climate action today to avoid the irreversible effects of climate change tomorrow. We must find effective ways to finance clean technology, fair transitions, and global emission reductions. In all of this, the role of the private sector in ramping up climate finance is critical, particularly in light of the highly insufficient action by governments.
Importantly, we all want to make sure our efforts have the greatest possible impact. In this vein, carbon credits, and the voluntary carbon markets (VCM) on which they trade, may be the most misunderstood climate solution in the world. The carbon credits (or offsets) sold via these marketplaces are validated and certified via rigorous standards applied by 3rd party auditors, and have already channeled billions of dollars in finance to drive verifiable climate change mitigation – well ahead of government regulation on climate change and as standards continue to improve in line with new science, technologies, and lessons learned to ensure high quality.
No other form of finance can claim the level of transparency in measuring impacts as carbon credits. And while voluntary markets are far from perfect, they work.
Carbon credits remain one of the most viable, near-term options for companies to measurably reduce global emissions. With emissions-free operations still a far-off prospect, science says that companies must invest in emission reduction activities beyond their direct operations, for example through certified carbon credits – all while working on the long term task of decarbonizing their value chain. Done right, the VCM can deliver much-needed finance, technical capacity, and significant sustainable development benefits that can help countries reach their goals, and transition the world to the low-carbon future that it needs.
But the complexity of the VCM and the fact that corporations are often motivated to use credits to polish their image, make offsets easy to criticize – and the system difficult to understand. A related challenge has to do with companies credibly using carbon credits as part of corporate targets and talking about the role that carbon credits play in their overall climate action efforts. Part of the problem is that the latest best practice in using carbon credits is not simple, actionable, or written in a language easy to understand by most companies and CEOs.
To truly move the dial on addressing runaway climate change, carbon credits should be used and talked about by corporations according to a clear set of principles that simplify and amplify the right way to do things – grounded in science and building on the work of many credible initiatives, such as the Science-Based Targets initiative (SBTi) and the Voluntary Carbon Markets Integrity Initiative (VCMi), among many others.
Our hope is that these principles will empower governments, businesses and society as a whole to have an informed discussion around the importance of carbon finance as part of global climate action.