Title: The Complexities of Pursuing Carbon Neutrality: A Deep Dive into the Challenges and Opportunities
Introduction:
In this article, we explore the complexities surrounding the pursuit of carbon neutrality for companies. While it was once seen as a positive step, recent controversies and allegations have raised questions about the effectiveness and credibility of carbon credits. We delve into the case of the Southern Cardamom project in Cambodia, which had its permit suspended due to allegations of human rights abuses. We also discuss the wider concerns regarding the quantifiable impact of carbon credits and the implications for companies aiming for net zero emissions. Despite these challenges, there are potential opportunities for voluntary carbon markets to direct funds to developing countries and incentivize forest protection. We also highlight initiatives aimed at improving the quality and transparency of carbon credits.
The Southern Cardamom Project Controversy:
– Southern Cardamom, a nature restoration project in Cambodia, had its permit to issue carbon credits suspended due to allegations of human rights abuses.
– The largest accrediting body for carbon credits, Verra, is currently investigating the allegations.
– Critics argue that the methodologies used to reduce emissions through forest preservation are not strong enough to justify offsetting companies’ emissions.
– The Wildlife Alliance, which runs the project, did not respond to requests for comment.
– Companies like McKinsey, Air France, and Bayer, who had purchased carbon credits from Southern Cardamom, now face the dilemma of whether to continue relying on these credits for their net zero goals.
The Dilemma for Sustainability Teams:
– Until recently, purchasing carbon credits was seen as a positive step for companies aiming for carbon neutrality.
– Many companies used the Southern Cardamom credits to cancel their annual emissions, but now face uncertainty due to the suspension of the project.
– Air France and Bayer emphasized their commitment to sustainability but stated that they are closely monitoring the developments regarding the project.
– McKinsey highlighted the positive impact of the credits on its website but declined to comment further.
– Companies must decide whether to push forward with claims of carbon neutrality, relying on voluntary carbon markets, or reassess their goals.
Opportunities and Challenges for Carbon Markets:
– The voluntary carbon market offers hope for directing funds to developing countries and incentivizing forest protection.
– US Treasury Secretary Janet Yellen highlighted high-quality carbon credits as potentially important for unlocking the capital needed to limit temperature rise to 1.5°C.
– The Securities and Exchange Commission proposed requirements for companies to disclose details on the quality of carbon credits purchased to build trust and integrity.
– The widening gap between the benchmark price for voluntary carbon credits and the spot market price for high-quality projects raises questions about the reliability and effectiveness of carbon credits.
Solutions and the Way Forward:
– Companies should focus on the quality of carbon credits and invest in projects with robust methodologies.
– Due diligence is crucial to ensure that credits are not based on flawed methodologies or associated with human rights issues.
– Education and training programs in carbon accounting can help companies seek the highest quality credits and build trust.
– A comprehensive approach is necessary to address the challenges and instill confidence in the carbon credit market.
Conclusion:
The pursuit of carbon neutrality faces numerous challenges, particularly regarding the credibility and effectiveness of carbon credits. The suspension of the Southern Cardamom project highlights the need for greater due diligence and a focus on high-quality credits. Despite these challenges, there are still opportunities to support forest protection and incentivize sustainable practices through voluntary carbon markets. By taking a comprehensive approach, companies can navigate the complexities and work towards meaningful progress in achieving net zero emissions.
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Until a few months ago, pursuing carbon neutrality was clearly a good thing for companies committed to achieving net zero emissions by 2050.
Then things got complicated. Fiercely contested allegations that most nature-based carbon credits were less effective than they first appeared pushed down prices and trading volumes.
Tension has reached particularly high levels in the EU, which plans to ban”climate neutral” by 2026, unless companies can demonstrate they can achieve this without the need for offsetting (where every tonne of carbon emitted is supposedly canceled out with one tonne of carbon avoided or captured).
But elsewhere there is hope that voluntary carbon markets could help direct much-needed funds to developing countries and incentivize forest protection.
In a speech at Climate Week NYC, for example, US Treasury Secretary Janet Yellen unveiled a series of net zero principles this included a reference to high-quality carbon credits as “potentially important channels” for unlocking the capital needed to limit the average temperature rise to 1.5°C.
And the Securities and Exchange Commission, in its draft climate disclosure rule, outlined proposed requirements for companies reveal details on the quality of the carbon credits purchased, to help build trust and integrity.
Read my story on the conundrum companies face when previously purchased credits are called into question. (Kenza Bryan)
A change in the company’s approach to carbon
What impact should the suspension of a single carbon credit project have on the corporate world’s approach to net zero?
For years, companies such as McKinsey, Air France and Bayer have purchased carbon credits from Southern Cardamom, one of Cambodia’s largest nature restoration projects.
This project claims to have avoided carbon dioxide emissions of around 3.9 million tonnes per year, thanks to the protection of rainforests, grasslands, lakes and coastal mangroves since 2016.
But its permit to issue carbon credits was suspended in June, after Verra, the largest accrediting body for carbon credits, received allegations of human rights abuses at the project site by Human Rights Watch.
The allegations, which Verra is still investigating, add to more fundamental concerns raised about the quantifiable impact of carbon credits. Critics question whether the methodologies used to reduce emissions through forest preservation are strong enough to justify “canceling” companies’ emissions to help them reach net zero by 2050.
The Wildlife Alliance, which runs the project with the Cambodian government, did not respond to requests for comment.
Joshua Tosteson, president of Everland, which markets the project’s credits, told Moral Money that the project has “significantly and unambiguously advanced human rights and forest protection in an extraordinarily challenging operating environment.”
For sustainability teams, the problem is that until recently purchasing carbon credits was seen as a positive step. In the case of the Southern Cardamom project, many of the companies listed as buyers of the credits used them to cancel their annual emissions for 2021 or 2022. None of the companies I contacted told me whether human rights issues were sufficient to cancel offsets and purchase new ones.
Air France, which has purchased at least 78,000 credits in the past three years, said the company buys credits due to a legal obligation to do so on domestic flights and that it is “closely monitoring developments” of the project.
Bayer, the German conglomerate, said it believes nature-based climate protection solutions are “important”, but that it will mainly reduce its emissions by 42% by 2029 compared to 2019 thanks to efforts in its own supply chain .
McKinsey, another of the buyers, highlighted the credits on its website last week, saying they had helped more than 16,000 people build better lives. He declined to comment.
The Big Three consultancies have more clout in the carbon credit game than most companies. Along with Alphabet, Meta, Shopify and Stripe, it has committed to spending nearly $1 billion on carbon removal credits before 2030.
He has also helped design initiatives that promote the use of carbon credits, including the Africa Carbon Markets Initiative. Campaigners say this could lead to foreign companies profiting from the continent’s natural capital, with too few guarantees on human rights issues linked to projects on the ground.
Chris Lang, editor of Redd-Monitor, a website focused on carbon credits, said buyers should have done more due diligence before using carbon credits with a “flawed methodology” or for human rights issues. “What they should do now is reduce their emissions.”
As more and more projects come under criticism, companies must decide whether to push forward with claims of carbon neutrality, which require relying on voluntary carbon markets, or abandon such goals altogether, given that few industries can achieve “true ” zero emissions in its supply chains. .
Ben Rattenbury, vice president for policy at Sylvera, a carbon data provider, said he was reassured by Apple’s presentation this week of a “Carbon neutral” watch. despite the recent controversies. “The idea that carbon credits as a whole are rubbish is misplaced,” she added.
For some the solution was to focus on quality, investing in projects before even starting to grant credit. The gap between the benchmark price for voluntary carbon credits based on natural projects and the highest spot market price for high-quality individual projects is widening, with a deal between a company and a project valued at $30 a June, compared to what was reported by CME data. The group says it is the reference price of $2.20.
Others, like the start-up Oneshot.Earth, are buying a variety of credits, but discounting the “offsetting power” of some of these based on the methodological risks surrounding them. While all credits aim to cancel or avoid the emission of one ton of carbon dioxide, some may only be credited with half a ton.
A final solution is education. Richard H Lawrence Jr, chairman of both Asia-focused asset manager Overlook Investments Group and non-profit organization Carbon Mapper, hopes to see a climate equivalent to the grueling qualification known as the Chartered Financial Analyst programme: a qualification to become Chartered Carbon analyst.
And the Partnership for Carbon Accounting Financials, a bank-led standards-setting group, said last week it had launched a program to train 2,500 professionals in carbon accounting.
The training could help companies seek the highest quality credit and build trust, Lawrence said. “We need to find the dirty secrets [poor-quality carbon credits] which the scheisters take advantage of, but at the same time we have to educate the board of directors.” (Kenza Bryan)
Intelligent reading
This year’s Burning Man appears to have fallen victim to climate change, after festival-goers were trapped for days camping in the Nevada desert due to heavy flooding in the surrounding area. So it was interesting to see the New York Times compare the city’s recent Climate Week to “Burning Man for climate fanatics”, full of breathing workshops, free ice cream and ecological wine. It takes optimism and community spirit to face the crises of the day, activists argue in the piece.
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