Carbon credits seek to regain credibility amid growing scrutiny
Sep 19, 2023
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The podcast discusses the decline in credibility of voluntary carbon markets and the initiatives taken to restore trust. It explores the challenges and trends in carbon credit prices, as well as the uncertainties and risks faced by the market. The chapter descriptions provide an overview of the topics covered, including integrity initiatives, challenges in the market, and the need for clarity.
Integrity initiatives such as the Voluntary Carbon Markets Integrity Initiative are being adopted to restore confidence in voluntary carbon markets and make high-quality claims.
The supply overhang, differences in national strategies, and the Article 6 framework pose significant challenges for the development of voluntary carbon markets.
Deep dives
Market coping with crisis in confidence
The voluntary carbon markets have faced a crisis in confidence due to integrity attacks and greenwashing accusations. Companies participating in the market voluntarily are looking to integrity initiatives, such as the Voluntary Carbon Markets Integrity Initiative, for price support and to make high-quality claims. The market is adjusting to higher integrity standards, with companies aligning net zero targets and focusing on decarbonization plans before offsetting. Recovery is possible with the development of integrity initiatives and the adjustment to the new scenario.
Initiatives addressing integrity concerns
Two initiatives are addressing integrity concerns in the voluntary carbon markets. The Voluntary Carbon Markets Integrity Initiative aims to help buyers understand the claims they can make when purchasing high-quality carbon credits. The Integrity Council for the voluntary carbon market has outlined 10 core carbon principles that will increase prices and provide support for credits with high integrity. The market is awaiting the CCP label, which will categorize credits based on their integrity. These initiatives are expected to impact prices and provide upward support for the market.
Stumbling blocks and outlook
There are three main stumbling blocks hindering the development of the voluntary carbon market. The supply overhang, with 790 million tons of credits available in the market, is pressing prices and creating a buyer's market. Differences in national strategies and approaches to the market create uncertainty. The Article 6 framework, particularly the corresponding adjustment and claims eligibility, will greatly impact the market. The market is expected to face challenges in 2023, but recovery and a pivotal year are anticipated in 2024 with the development of integrity initiatives and clarity on Article 6 guidelines.
Voluntary carbon markets are facing a critical moment in their short history. Questions about the integrity and effectiveness of many carbon projects have led to a sharp fall in prices and liquidity. However, a series of quality and transparency initiatives are being adopted to restore confidence in offsets.
S&P Global Commodity Insights' experts Eklavya Gupte, Dana Agrotti and Silvia Favasuli discuss the road to recovery for the VCM as it seeks to rebuild credibility and trust.
Hear more on the latest developments in the carbon markets by attending the Global Carbon Markets Conference taking place on November 6-9, 2023 in Paris.