Mark Carney Launches Taskforce on Scaling Voluntary Carbon Markets

Progressing Voluntary Carbon Markets

Mark Carney, the UN Special Envoy for Climate Action, has recently pushed for action to develop the voluntary carbon market. The Taskforce on Scaling Voluntary Carbon Markets, spearheaded by Carney, aims to increase the size, efficiency, and transparency, of the voluntary carbon market, while driving climate action to keep global temperature rise below 2°C.

Background to Offsetting

In recent years, more and more companies are issuing pledges for carbon neutrality, Net Zero Carbon and climate positive actions. While the focus of any mitigation effort should always be to reduce greenhouse gas emissions first, offsetting offers a positive response to emissions which otherwise cannot be reduced or removed entirely. If a company wants to be considered carbon neutral, it therefore needs to offset any remaining emissions, after reduction has taken place.

The amount of CO₂ a company or individual wants to offset is bought as ‘carbon credits’ for particular offsetting projects, usually at a rate of 1 credit per tonne of CO_2e, with differing prices for credits depending on the project. Projects range from large renewable energy farms to clean cookstove carbon projects in rural villages. The infrastructure which currently allows the projects to be advertised, and credits to be bought for them, is called the Carbon Market.

The Taskforce

In September 2020, the Taskforce began designing the blueprint for scaling-up the voluntary carbon market. The final work is expected in early 2021. Initiated by Carney, the Taskforce’s more than 50 members include both sellers and customers of carbon credits, and those involved in setting standards.

6 key topics for action have been made by the Taskforce, which encompass the entire value chain. The actions are the specific methods that the Taskforce has deemed necessary to achieve the successful upscaling of the voluntary carbon markets.

1. Core carbon principles and attribute taxonomy
2. Core carbon reference contracts
3. Infrastructure: trade, post-trade, financing, and data
4. Consensus on the legitimacy of offsetting
5. Market integrity assurance
6. Demand signals

Offsetting Projects and Carbon Credits

Offsetting projects either avoid or reduce CO₂ emissions, or remove and store it outside of the atmosphere. The ‘saved’ emissions produced by the projects can then be bought as carbon credits for offsetting elsewhere on a carbon market.

Three main types of offsetting projects:

Avoidance/reduction

• These projects operate by utilising a technology or method which reduces the outputted emissions of an area. Therefore, reduced emissions are released to start with. This can occur with I.e., a more energy-efficient cooker, or by burning animal waste instead of chopping local forests for firewood.

CO₂ sequestration with nature

• These projects enhance or protect natural carbon storage processes and locations, which maintains and increases the amount of carbon stored. Projects include maintaining peatland and ancient woodlands, and planting trees.

CO₂ sequestration with technology (Not Yet Commercially Available – Under Development)

• These projects remove and store CO₂ in man-made technologies. Although the technology is in its infancy, bioenergy with carbon capture and storage (BECCS) one of the options to remove and store CO₂ from the atmosphere. It is likely that the use of this technology will increase in the future.

Risk Management

Due to the nature of offsets, there is a certain amount of risk involved in purchasing carbon credits. That being said, as carbon neutrality pledges become more popular, there is a great need to increase the size of the carbon credit resource base, while maintaining the integrity and quality of offsets. 

In addition, risks associated with the carbon market could be hedged by:

• Increasing transparency of projects to provide reputability and legitimacy to credits.
• Concentrating liquidity by using core carbon reference contracts.
• Increasing the size of the voluntary carbon market, including number of projects and credits available.
• Maintain and increase the amount of monitoring, reporting, and verification on the market through digital project cycles.
• Establishing effective demand signals to improve transparency of projects throughout their lifecycle.

From Short-Term Reduction to Long-Term Removal

Another message from the Taskforce was the need to move offsetting from short-term avoidance and reduction projects, towards long-term carbon storage. This idea synergises with the recent Oxford Principles for Net Zero Aligned Carbon Offsetting (2020), which emphasises the need to shift climate action efforts to methods which can scrub carbon from the atmosphere and store it for millennia with low risk.

Are Voluntary Offsets Enough?

Overall, the message from the Taskforce is clear; global emissions must reduce drastically if temperature rise is to be limited, and this must be prioritised over offsetting. After this, the aims of increasing transparency, legitimacy, and availability of carbon credits on the voluntary carbon market, will undoubtedly increase the likelihood of meeting global temperature targets and mitigating the impact of climate change.

If you would like to discuss carbon offsetting, please feel free to contact us.