Posted: May 17, 2023

Mythbusting the 7 Main Criticisms of Carbon Credits

We need carbon credits. Any viable path to a livable planet runs through carbon avoidance and removal. But as the voluntary carbon market (VCM) grows, many are raising questions — and rightfully so — about the quality and efficacy of carbon projects and the credits they create.

Let’s address these criticisms head on. In this article, we’ll look at some of the potential problems raised by carbon credits — and the solutions we can implement to address them.

Prefer to watch, rather than read? Then check out our the video version of this article here.

Myth #1: Carbon credits have no real impact on the environment

The most glaring concern is that carbon credits don’t actually have any real impact in the fight against global warming. You may have seen John Oliver’s segment on this topic (and be sure to check out our response). The main argument is that many carbon projects are lacking in one or more of these key areas:

Additionality means the climate benefit wouldn’t have happened on its own (without cash from carbon credits poured into the project). For instance, trees in a protected forest can’t generate credits because the ability to sell carbon credits didn’t provide the incentive to keep those trees standing.

Permanence means that greenhouse gas mitigation resulting from the project is on a long enough timescale so as to be considered permanently abated or removed. A tree that gets cut down a few years after planting won’t have made much of a difference.

🤝 Co-benefits  — additional benefits beyond reducing or removing carbon — are another important aspect of high-quality projects. Ideally they should provide benefits to the local environment (such as strengthened biodiversity) and to local communities (like employment or revenue-generating opportunities).

This criticism isn't entirely unfounded — we’ve seen our fair share of bad carbon projects. In fact, only about 20% of the carbon projects we evaluate do these things well enough to earn our stamp of approval.

Higher Standard

It’s why we’ve developed our own rigorous evaluation and monitoring process — we go well beyond current market standards to ensure we provide only the highest-quality carbon credits, every time.

Let’s use one of our carbon projects to illustrate: the Kenya Agroforestry Project, which is helping thousands of Kenyan smallholder farmers and their families develop forest gardens — multi-tiered mixtures of trees, shrubs, and crops — allowing them to maximize yields and improve their land’s health and quality.

 The project is additional because without the upfront investment provided by climate financing, the farmers could not have implemented these practices on their own. Conventional farming involving monocropping of maize and other staples is what they know, have always done, and would continue to do given existing infrastructure. The switch to more sustainable practices takes time, training, and physical inputs (like seedlings and labor). There aren’t sufficient government programs, extension services, or other funding sources that might have incentivized that switch. Revenue from the sale of carbon credits funds the required education and training program, and provides an income stream for the farmers, making it worthwhile for them to adopt and maintain these practices.

 The climate impact is permanent because of the incentive structure and long-term land management benefits. While there is some inherent risk to any project (catastrophic climate or economic events for instance), these risks are mitigated in the short term by the project’s benefit structure, which gives them ongoing revenue. Over time, the forest gardens also give farmers access to new income generation through the sale of alternative and varied crops, and greater food security through regular access to a wide variety of foods. In the long run, switching from monoculture to polyculture builds a healthier agro-ecosystem including improved water retention in the soil and better erosion control, significantly reducing the effects of drought, erosion, or salinization of the soil — making the land much more resilient to any potential climate disasters than if it were farmed more conventionally. Due to the multiple benefits of the program over time, farmers have very little incentive to reverse their practices once implemented.

 The project features important co-benefits, including the educational and economic benefits for the farmers mentioned above. It also means healthier soil and better crop outputs — increasing food diversity and food security for local families. The adoption of more sustainable polyculture practices, in particular additional tree species, provides wildlife habitat and adds diversity to species of flora. Over time, we expect to see increased biodiversity of both flora and fauna as forest gardens restore elements of natural ecosystems within this agricultural region.

That’s just one example of what a high quality project looks like — and there are many more out there. We’ll continue improving our standards and methodologies to ensure quality, and welcome any larger multi-stakeholder or regulatory initiative to raise the bar on quality and transparency across the carbon market.

Myth #2: Carbon credits allow companies to engage in greenwashing

The dubious quality of some carbon projects gives rise to a second major concern: carbon credits can easily be used for greenwashing.

A company can claim to be offsetting its emissions, but what if they’re not actually investing in legitimate greenhouse gas mitigation projects? That would mean their true climate impact falls far short of whatever they’re claiming publicly.

The solution, once again, boils down to ensuring credit quality. Businesses must engage in extensive due diligence when sourcing their carbon credit providers. They need to partner with organizations they can trust, who can readily and transparently provide data and evidence of real climate impact — for every carbon project in their portfolio.

characteristics of high quality carbon credits

Businesses can further avoid the “greenwash” label by publicly setting emissions reduction targets aligned with the guidelines and recommendations provided by the Science Based Targets initiative (SBTi). For instance, the SBTi’s Corporate Net-Zero Standard is a framework designed to give companies all the tools and guidance needed to set ambitious emissions reduction targets in line with the latest climate science.

Ultimately, businesses can best demonstrate their commitment to net zero by regularly reporting on their progress against science-based reduction targets, and transparently sharing information about the quality and efficacy of the carbon credits they purchase.

That gives them all they need to make legitimate claims about their climate impact, and back those claims up.

Myth #3: Carbon credits are a “free pass to pollute” that lets companies avoid reducing their own emissions

Some argue that companies can simply offset their emissions without actually reducing them, leading to a false sense of progress. The truth is, both reducing and removing carbon are necessary.

Releasing the least amount of carbon possible — by taking every available action to quantify and reduce emissions —  is an absolutely essential first step for every business.

Only then should they look to carbon credits to offset the residual emissions they truly cannot avoid. The fact is, very few (if any) companies can feasibly bring actual emissions down to zero and still operate. But only after they’ve done all they can should carbon credits come into play.

This is the very approach recommended in the Oxford Principles for Net Zero Aligned Carbon, an oft-cited resource designed to help organizations deliver on their net-zero commitments. Its authors, a group of eminent scholars and scientists, explain: “To meet the Paris Agreement’s objective [...] we must rapidly move toward net zero carbon dioxide emissions by mid-century. This means substantially reducing emissions and balancing any residual emissions with removals on an ongoing basis.”

This is reflected clearly in Principle #1: Cut emissions, use high quality offsets, and regularly revise offsetting strategy as best practice evolves.

So as valuable as they are in the fight against climate change, carbon credits are just one part of a larger greenhouse gas mitigation strategy that also includes operational carbon reductions, the expansion of carbon sinks, and the adoption of renewable energy sources.

The truth is, there is no single solution to climate change. It’ll take a patchwork of solutions, all of which we must deploy and scale. We don’t have much time left to turn things around — we need to use every tool in the kit.

Myth #4: Technological solutions won’t work…or they’re the only thing that will

Some critics argue that technology-based carbon solutions like Direct Air Capture won’t work, while others are convinced technology is the only way forward — two sides of the same myth, so to speak.

The cynical side believes technological solutions won’t work because they’re too expensive, energy-intensive, and unproven at scale. They fear shiny tech solutions could distract from more urgent and effective actions like reducing emissions or enhancing natural carbon sinks.

The pro-tech side argues it’s too late to rely on emission reductions and natural solutions — human behavior won’t be able to change drastically enough, quickly enough.

The truth, as usual, is somewhere in between. Tech-based solutions are neither a magic bullet nor a pipe dream. They’re part of the patchwork, and we need to develop and deploy them in parallel with natural solutions.

When it comes to removing carbon from the atmosphere, we can’t get stuck in an “either/or” mindset. We need to be thinking “both, and more.” Again, the only solution is multiple solutions.

Myth #5: Reforestation alone can’t solve the climate crisis

This one’s not a myth at all — it's actually true! But unfortunately, it's used as a strawman argument that we see all too often. No credible authorities are suggesting that reforestation is the only thing we need to do to solve the climate crisis.

Reforestation is no more of a silver bullet than technology, but it is a vital part of the solution to the climate crisis, along with other nature-based solutions — as many have concluded.

A report from the Rocky Mountain Institute concludes: “Deploying land-based carbon sequestration and other ‘negative emissions’ technologies at scale is critical for addressing climate change.”

Even the United Nations has declared that carbon removal is now essential. And the UN’s Intergovernmental Panel on Climate Change (IPCC) recently determined in its AR6 synthesis report, ecosystem restoration is the most scalable and cost-effective option for carbon removal that currently exists — and reforestation is a critical piece of that. But just a part.

Figure SPM7, IPCC AR6 Synthesis Report

Source: Figure SPM.7, IPCC AR6 Synthesis Report

But even on top of all the carbon benefits, the truth is, nature needs our help. Following the release of a major report on the importance of biodiversity finance, research company BloombergNEF called on financial institutions, companies, and governments to “ramp up financing and integrate nature into their plans and policies.”

Myth #6: Carbon avoidance isn’t as valuable as carbon removal

Carbon avoidance tends to spark more debate than carbon removals, perhaps because it's harder to conceptualize the value of preserving a natural carbon sink than the value of creating a new one.

Then there’s the fact that avoidance projects use counterfactual baselines to calculate the credits they produce. Anytime hypothetical numbers are used, it becomes easier to poke holes in the underlying methodology.

We and others address this concern by constantly evaluating and updating our methodologies for counterfactual calculations, and undertaking extensive due diligence to ensure these projects are truly additional and don’t result in leakage elsewhere.

Because the fact is, preserving our planet’s natural and existing carbon sinks is critical in the fight against climate change. If a forest doesn’t get cut down directly due to climate finance (remember additionality), that represents a meaningful amount of carbon dioxide not being released back into the atmosphere.

What’s more, there are benefits beyond carbon removal to preserving nature and natural habitats. A report from the World Wildlife Fund found that the world has lost two-thirds of its wildlife just in the last 50 years, largely due to forest clearing. Their conclusion is succinct: “our relationship with nature is broken.”

Another report from the SBTi explains in depth how preserving nature is connected to greenhouse gas mitigation. “The loss of nature is not only causing further accumulation of carbon in the atmosphere, but also decreasing the ability of our natural systems to reduce atmospheric carbon concentrations,” the report’s authors state.  “It is an undeniable priority that ambitious action must be taken to eliminate deforestation and to halt nature loss.”

Finally, absent protection, the loss of nature could increasingly take an economic toll as well. Recent research published by global financial auditors PwC shows how intimately economic activity and natural ecosystems are linked, concluding that nature’s decline poses a risk to more than half of global GDP.

Myth #7: Carbon projects have a negative impact on local communities

This is a potential pitfall we take very seriously when evaluating projects.

It starts by working with our project partners to ensure local communities are involved at every step of the process, from initial scoping to project design to ongoing implementation. Not only must every project “do no harm,” it must also provide concrete benefits to the local people on the front lines of climate action:

  • No project of ours goes ahead without the Free, Prior, and Informed Consent (FPIC) of local communities involved or affected.
  • We require benefit sharing, whereby a portion of carbon revenue from any project flows back to local communities.
  • We mandate fair living wages for any direct employees of the project.
  • We ensure the project delivers co-benefits to communities such as employment opportunities, reduced poverty, increased food security, or additional health benefits.
  • We regularly visit our projects on the ground to do our due diligence and make sure conditions are exactly what they appear to be.

A good example is the Mai Ndombe reforestation project. Not only has the introduction of sustainable agriculture practices relieved deforestation pressure, the local community has benefited in these ways as well:

 11,000+ community members have reported improved well-being.
 Nearly 400 local people have been employed
 8,500+ students in 51 villages have received learning kits and school supplies.

There’s no reason that the development of carbon projects shouldn’t have a positive impact on the local communities — it’s in everyone’s best interest, and we believe it best ensures the project’s success. Having communities benefit from these projects helps to ensure project permanence and the continuity of carbon mitigation, throughout the project’s lifecycle and beyond.

So…are carbon credits worth it?

In a word, yes. According to the IPCC, the only way to prevent catastrophic climate change is through a combination of operational carbon reductions and the expansion and preservation of carbon sinks, like forests and other natural ecosystems.

The bottom line could not be more clear: to beat climate change, we need to both reduce our own emissions and support projects that remove carbon from the atmosphere.

For now, carbon projects — and in particular nature-based projects — remain the most effective way to remove carbon from the atmosphere while still providing important co-benefits like increased biodiversity and improved technology for communities.

It’s important to understand the limitations of carbon credits, but there’s no question that quality carbon credits are one of the most powerful and effective tools we have in the fight against climate change.

Corporate climate leadership is urgently needed to scale climate solutions and mitigation projects far faster than is currently happening. That's why we’re committed to providing only the highest-quality carbon credits that, through legitimate carbon avoidance and removal, represent real and lasting change.

If you’re ready to discuss partnering with Catona Climate to achieve your net zero goals while avoiding the carbon market’s potential pitfalls, get in touch with our carbon experts.

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