The $2 billion voluntary carbon-offsets market has suffered allegations that many credits don’t deliver the emissions cuts they promise, but multiple efforts to rebuild credibility face an uphill battle. In 2023 the US Commodity Futures Trading Commission said it would make policing carbon offsets a priority. Nestlé decided to leave the market and standard setters published guidelines that few existing buyers would meet…“The offset industry’s inability to self-regulate has produced a slow-moving crisis,” said Danny Cullenward, research fellow at the Institute for Carbon Removal Law and Policy at American University. “Companies are asking whether the marketing benefits are worth the legal risks.”
Morgan Stanley estimated in February 2023 that that carbon offsets could be a $100 billion market by 2030. However, over the past year the market’s credibility has suffered after a series of allegations that credits aren’t delivering on their emissions-reduction promises. It has left many companies with cold feet.
Each carbon credit is supposed to equal one metric ton of carbon dioxide avoided or removed from the atmosphere. Removal credits usually fund restoration projects such as tree planting, while the most common offset or avoidance credits fund energy-efficiency projects, renewable energy or protect forests. These so-called voluntary credits are separate and usually cheaper than government-regulated carbon trading that polluters pay for in the European Union and elsewhere. There are also some voluntary credits for mechanically removing CO2 directly from the air, which are currently much more expensive.
0In June 2023, the CFTC— the US federal regulator of derivatives—created an environmental task force focused on rooting out fraud in carbon markets. Earlier that month, the agency called for whistleblowers to expose misconduct. “As carbon credit markets continue to grow, we will act to foster the integrity of these markets by fighting fraud and manipulation,” CFTC Enforcement Director Ian McGinley said.
Excerpts from Dieter Holger, Rebuilding Trust in Carbon Offsets Faces Uphill Battle, WSJ, July 12, 2023