ECO is up to its ears in statements about carbon markets saving us all from climate armageddon. Even the COP presidency managed to graciously find some time in its busy schedule to organize a roundtable on scaling up voluntary carbon markets.
Delegates, we must not be reading the right media articles. Because so far, 2023 has not been sunshine and roses, but instead it’s been quite apocalyptic for carbon markets, with countless scandals emerging. Overestimated emissions reductions, forced displacement, sexual abuse; the list goes on. It has been so bad that, when announcing the US’s new Energy Transition Accelerator (read: carbon offset market), the only positive example of an emission trading market Secretary John Kerry could cite in his speech was a system that (a) didn’t involve carbon offsets, (b) didn’t focus on GHGs, and (c) was implemented 30 years ago!
One big question that still bothers ECO: where is the money? The (self-interested) predictions of banks and consultants describe a market worth tens or hundreds of billions of USD in a few years. Who will actually benefit from this money? Could it be those making the predictions? ECO suspects that is a possibility.
In the voluntary market, intermediaries buy and sell credits with zero transparency. Who holds the units? At what price are they purchased? How much money ultimately flows to project developers, let alone local communities or Indigenous Peoples? ECO suspects the answer to that last question is very little.
Countries and companies pledging to invest in carbon credits and market “infrastructure” should remember that it’s not just about acquiring credits. It’s about supporting mitigation actions where they are most needed, in accordance with what the local people want, human rights, and ecological integrity. Without transparency on where the money is flowing, there will continue to be an opportunity for the wrong players to step in (ECO is looking at you, tax-haven registered investment bankers that recently discovered a passion for solving the climate crisis through carbon credit speculation!) and for actions that benefit carbon cowboys at the expense of people and planet.
This issue can be addressed. Under Article 6, countries must ensure the maximum level of transparency, including disclosure of account holdings in the numerous registries that are being established (international, mechanism and Party registries) and closing gaps in the confidentiality provisions by developing a dedicated work programme and code of conduct. A clear system to track units must be implemented, maintaining the public recording of carbon credit transactions and end use. Some actors in the Voluntary Carbon Market (but notably not yet the big standards) are already showing examples of how this can be done, and others should follow.
Without transparency, any form of credibility is unlikely to be restored for carbon markets (if it ever existed). Integrity and transparency go hand-in-hand. And just repeating the word ‘integrity’ over and over again does not make it true.